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Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

Annual report of the North Carolina Office of the State Auditor : accountability, integrity & reliability

2006 Annual Report & 2007 Strategic Plan
North Carolina Office of
the State Auditor
Lesl ie W. Merritt, Jr., CPA, cfp
Decreasing risk through
proactive measures
Honesty • Integrity • Professionalism
North Carolina Office of the State Auditor
3 Message from the Auditor
4 Strategic Plan
8 Information Systems Division
10 Performance Audit Division
13 Financial Audit Division
15 Management Services &
Nongovernmental Compliance Division
18 Investigative Division
24 General Administration
27 Appendix A
34 Appendix B
Contents If a single word could sum- up my vision for how the Office of the State Auditor ( OSA) will play its role in State government, that word would be “ proactive.” Being proactive in a fight against wasteful spending is more than plain rhetoric or a campaign slogan. It means helping achieve effectiveness and efficiency in State government which is a principled bipartisan goal.
The underlying philosophy of being proactive is embracing the idea that the State is not a proprietor of resources, but a trustee of taxpayer money. When put to use for the public good, this money can grow communities and foster a safer, more stable society. However, waste, fraud and abuse of State resources are unconscionable acts and a severe violation of the public trust by those in authority. The State’s resources are the sum of all taxpayers’ earnings which could have been put to good use by the individual earner for the betterment of his or her family. Respect for the taxpayer is the core of this philosophy.
Financial auditors have been through extensive training to improve audit productivity by shifting focus to risk- based auditing. Adopting these principles is a natural extension of a proactive philosophy. Part of what we accomplished in 2006, and my vision for 2007, is to decrease the occurrence of wasteful State spending through a risk- based realignment of OSA’s structure. Through increased training, the use of modern technology and a dedicated yet flexible staff, resources and personnel have become untethered from retroactive auditing techniques as we move toward the use of many risk- based tools.
One such tool is the Strategic Audit Review which will build a bridge from an abstract proactive policy to the actual practice of being proactive. Reams of data flow through State government every day and Strategic Audit Reviews will eventually cover areas that have either escaped OSA scrutiny or show suspicious data trends. While strategic auditing is a standard bearer for our proactive practices, our focus has been to build a team- centered approach. An increase in nonprofit training and compliance, marketing the State Auditor Hotline and financial auditors who think outside of the box are all proactive tools that contribute to stamping- out inefficiencies, waste and abuse before they become problems.
In 2006, the low hanging fruit is already being gathered. As we move into 2007, the success built on the framework of a proactive philosophy, policy and practice will create the momentum to reach higher and tap further into areas of fraud, waste and abuse in State government. As a result State money, the taxpayer’s money, will be able to lift people higher, meet more of our neighbor’s needs and go further in building stronger communities across North Carolina.
Annual Report 2006 | Message from the Auditor
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Decreasing risk through proactive measures
Message from the Auditor 4
The goals expressed in this strategic plan are intended to be implemented throughout 2007 based on the proactive philosophy articulated in the State Auditor’s message. The strides made in 2006 serve as the launching pad for OSA’s work in 2007 and beyond. Nothing embodies this rebuilding better than 2006’ s AuditWatch training.
AuditWatch
Efficiency Gains
AuditWatch productivity program is considered the premier training program in the audit profession. In today’s environment, as legislators and taxpayers scrutinize expenditures and search for increased value for hard- earned tax dollars, technical excellence and timely reports are not enough. OSA must provide audits in the most efficient manner, and must dramatically change the way audits are conducted. The AuditWatch program met these goals by teaching best practices and innovative techniques from private audit firms, keeping the OSA current on rapidly changing technology to improve productivity, and applying critical thinking analysis and unbiased feedback on current OSA auditing techniques and practices.
Using principles learned through AuditWatch training, OSA has found the necessary tools to whittle away inefficiencies and streamline work product to free- up resources to focus more on fraud, waste and abuse in State government. The bottom line efficiency goal is to reduce audit hours by 25% in the first year. Once achieved, this reduction will be equivalent to a remarkable 35,000 work hours, or adding 22 fulltime auditor positions, which will fuel proactive techniques and team- centered strategies in all of OSA’s divisions.
But the AuditWatch efficiency gains will not stop in 2006. OSA’s strategy in 2007 is to educate State agencies to prepare the more time consuming supporting worksheets in anticipation of the audit, and to train OSA auditors to determine which tasks to undertake and which to leave for the agencies. By engaging the agency in this type of auditing jujitsu, OSA will produce greater efficiency gains and reduce the agency’s audit anxiety by moving auditors in and out of the agency as quickly as possible.
Building on these efficiency gains, the following lays out OSA’s strategic plan to raise accountability in State government.
Information Systems Division
Team- Centered Approach
Information Systems Division ( IS) auditors occupy a unique position to be able to think proactively about discovering suspicious data trends flowing from an agency’s information technology systems. OSA’s goal for 2006 was to integrate IS auditors into financial audit teams with the specific purpose of accumulating and analyzing financial data looking for unusual trends. In 2007, IS auditors will now analyze the numbers to objectively confirm whether fraud, waste or abuse is occurring in any given audit throughout State government. To take full advantage of their
Strategic Plan
Annual Report 2006 | Strategic Plan
Decreasing risk through proactive measures North Carolina Office of the State Auditor
position on the auditing team, IS auditors will rely
upon the innovative techniques of data mining.
Data Mining
OSA has become a leader of state audit shops in
proactive thinking. By consulting with a national
data mining expert from Brigham Young University,
OSA is developing formulas
to find trends in State
government data that lead
to exposing fraud, waste
and abuse. In 2006, the OSA
employed these techniques
to uncover Social Security
Number fraud in the State’s
government. In 2007, the
OSA will expand data
mining’s use to till the
ground in more areas of
State government.
Strategic Audit Reviews
OSA believes Strategic
Audit Reviews build a
bridge from abstract proactive techniques to the
actual practice of being proactive. The Strategic
Audit Review is the vehicle used to combine team-centered
integration, data mining techniques and
their subsequent findings into a single public
document. In 2007, OSA plans to invest a portion
of the AuditWatch efficiency gains in IS to conduct
more Strategic Audit Reviews.
Investigative Division
Team- Centered Approach
The Investigative Division is a key component
of OSA’s strategy to raise accountability in State
government in 2007. To proactively reduce waste
in State government, audit teams must possess
an investigative eye. This has proven to be true in
routine audits in 2006, where suspicious facts may
have been dismissed because financial- oriented
audit programs did not encourage out- of- the- box
thinking and creative procedures. In 2007, OSA
will be working to build
a team- centered auditing
approach where all auditors
are given the analytical tools
and training to proactively
look for fraud, waste and
abuse of taxpayers’ money.
State Auditor’s Hotline
The promotion of the State
Auditor’s Hotline has proven
to be the tip source for the
majority of investigations
leading to direct savings for
taxpayers. This one area is
unique in that money spent
to promote the Hotline
will likely reap a far greater amount in savings
when fraud, waste and abuse of taxpayer money is
uncovered. In early 2007, the OSA plans to unveil a
major plan to promote the State Auditor’s Hotline
using all available tools and resources.
Increase Resources
A portion of the AuditWatch efficiency gains will
be put to good use in the Investigative Division.
Promotion of the Hotline will likely result in
more tips and more investigators will be needed.
As a result, OSA plans to add more supervisor
positions to the Investigative Division to bring
Decreasing risk through proactive measures 5
Once achieved, this
reduction will be
equivalent to a remarkable
35,000 work hours, or
adding 22 fulltime
auditor positions...
greater flexibility to investigations and allow the
Division to simultaneously handle multiple major
investigations in 2007.
Performance Audit Division
Greater Flexibility
Performance audits are usually large in scope,
extremely detailed and
require a significant amount
of OSA resources. As a result,
OSA issues a limited number
of performance audits each
year. In 2006, OSA retooled
the Performance Audit
Division with an eye toward
producing reports that
are narrower in scope and
target specific programs or
areas where the state is at
the greatest risk for fraud,
waste or abuse. In 2007,
OSA’s plan is to apply that
narrow focus to areas of
risk with greater flexibility
as problems emerge. One example of increased
flexibility would be for OSA to provide a timely
response to a legislator’s or taxpayer’s specific
request for a review in their district or area.
Increase Resources
Building on the influx of auditing experience
into the Performance Audit Division in 2006, OSA
plans to conduct more performance audits in 2007.
OSA will meet this goal by reinvesting a portion of
AuditWatch efficiency gains into the Performance
Audit Division and training Performance auditors
to work with greater efficiency. In fact, this training
will conclude by the end of 2006 and Performance
auditors will already be working to meet the
heightened goals in early 2007.
Agency Cooperation
In 2007, OSA is prepared to work along side
other State agencies to set a bench mark by which
State government performance can be measured.
By supporting the new
Government Performance
Audit Committee ( GPAC)
initiative and the Office
of the State Controller’s
initiative to monitor
internal controls as an
extension of management,
OSA’s Performance Audit
Division is prepared to
help steer the focus and
raise accountability in State
government.
OSA takes seriously
the goal of seeing the
internal audit function
strengthened throughout
State government. By working with State agencies,
universities and community colleges, and the
legislative Fiscal Research Division, the OSA plans
to extend its proactive philosophy to the fullest
extent allowed.
Management Services and
Nongovernmental Compliance Division
( MS& NGCD)
Compliance
OSA has oversight responsibility over $ 650-
$ 750 million a year in State and federal grants
to thousands of nonprofits, not- for- profits and
other entities that receive State funds. Therefore,
6 Decreasing risk through proactive measures
Annual Report 2006 | Strategic Plan
In 2007, OSA will be
working to build a
team- centered auditing
approach where all auditors
are given the analytical tools
and training to proactively
look for fraud, waste
and abuse of
taxpayers’ money.
North Carolina Office of the State Auditor
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Decreasing risk through proactive measures
nonprofit reporting compliance is essential to raise accountability in State government. OSA’s long term goal for MS& NGCD is 100% reporting compliance for all nonprofit organizations. At fiscal year end ( FYE) 2006, the Division identified 437 nonprofit organizations in noncompliance. By FYE 2007, OSA’s strategy is to make steady progress through increased accessibility, training, and accountability to cut noncompliance by 30% or 137 noncompliant grantees.
Increasing accessibility to nonprofit grantees is an important goal for 2007. OSA is developing a reporting function that gives grantees the ability to file their annual reports online. This step will reduce paperwork by promoting electronic filing, eliminate redundancy by simultaneously filing with the grantor agency and OSA, and allow for real- time public access of online annual reports and reviews.
Grantor and grantee reviews are a new tool that OSA plans to use more in 2007. By October 2006, the Division posted 8 grantee reviews. OSA’s goal is to release 24 grantee reviews in 2007, however, that number could be significantly increased by the end of this fiscal year. In addition, OSA plans to complete monitoring reviews of grantor agencies. OSA’s goal is to complete 12 agency monitoring reviews by the end of next fiscal year.
Training & Best Practices
Training is a proactive tool to keep nonprofits in compliance and bring truant organizations back into good standing. OSA’s strategy to boost compliance in 2007 is to maintain the high paced training schedule from 2006, plus increase efficiency and raise effectiveness. An important part of the training’s effectiveness is providing accurate information on evolving issues to local grantees and State grantor agencies. To accomplish this effort, MS& NGCD will continue to issue its Best Practices newsletters that will target issues and information applicable to individual grantees and grantor agencies.
Increase Resources
In 2007, OSA’s plan is to increase training, compliance and accountability with nonprofit organizations that receive state and federal grants. OSA already has the infrastructure in place to invest AuditWatch efficiency gains in MS& NGC. Through training existing branch office staff to work with nonprofits, OSA can meet its training, compliance and accountability goals and review nonprofits while working within their surrounding
geographic areas.
Financial Audit Division
Efficiency Gains
The Financial Audit Division is OSA’s largest division and biggest user of available resources. Because of these facts, the AuditWatch curriculum’s focus on improving efficiency presented a major opportunity to Financial Division auditors and staff. By committing to AuditWatch’s efficiency principles, Financial’s auditors and staff have cut inefficiencies and have the goal of expanding productivity by 25%. That means that up to 35,000 work hours can extend the reach of Financial, Information Systems, Investigations, Performance, and MS& NGC divisions. Without the steadfast commitment to efficiency by the Financial Audit Division, the OSA would be unable to meet the goals outlined in this Plan and the State would be unable to reap the benefits. 8
Decreasing risk through proactive measures
The Information Systems Audit Division’s ( IS Division) responsibilities include analyzing State agency computer systems to ensure that they are properly secured, produce accurate financial reports and comply with State regulations. Staff in this division conduct their own audits of computer systems across the State. In addition, they provide IS audit assistance to financial audit teams to ensure that agency computerized accounting systems can be relied upon to produce accurate financial reports. Without those assurances, financial audit teams would be unable to issue unqualified opinions on the accuracy of agency financial statements.
IS Division auditors are in a unique position to think proactively about discovering suspicious data trends flowing from an agency’s information systems. OSA’s goal for 2006 was to integrate IS auditors into Financial and Investigative audit teams and to increase proactive auditing by providing computer forensic assistance and data mining analyses of agency financial data.
To accomplish this goal, OSA developed a new tool called Strategic Audit Reviews that are issued separately from IS audits. These reviews are used to uncover fraud, waste or abuse of taxpayer resources by following suspicious State agency data trends. While initiated and coordinated by the IS Division, these reviews involve auditors from all divisions of the OSA.
Strategic Audit Reviews build a bridge from an abstract proactive policy to the actual practice of being proactive. By conducting Strategic Audit Reviews through the use of data mining analysis, OSA is in the forefront of auditing trends. To improve innovation and effectiveness, OSA hosted an on site visit of a leading expert in data mining from Brigham Young University. Fueled by resources from AuditWatch efficiency gains, OSA plans to increase the number of Strategic Audit Reviews to bring more accountability to State government.
The OSA’s emphasis for the future is to weave more IS Division auditors into other auditing processes to instill a team- centered approach. Together, the team can more readily identify security risks or suspicious data trends. The General Assembly has approved OSA’s request to hire 6 additional auditors over two years to facilitate the team- centered approach to auditing.
The following is a summary of IS Division’s reports and reviews conducted during 2005- 2006:
IS Audit: North Carolina Central University – General Controls Review
IS conducted an Information System audit of North Carolina Central University. The primary objective of this audit was to evaluate IS general controls at NCCU. The scope included general security, access controls, program maintenance, systems software, systems development, physical security, operations procedures, and disaster recovery. We found weaknesses in systems software and disaster recovery. In systems software, we found that software standards and documentation needed improvement. In disaster recovery, we found that critical general ledger application system
Information Systems Audit
Division
Annual Report 2006 | Information Systems Audit Division North Carolina Office of the State Auditor
Decreasing risk through proactive measures 9
backup tapes were not sufficiently rotated off- site.
The general controls review also revealed several
weaknesses in access controls. Those improvements
were recommended to
management in a private
letter because of the sensitive
nature of the findings.
IS Audit: the University
of North Carolina at
Wilmington – General
Controls Review
IS staff audited the
University of North Carolina
at Wilmington. The primary
objective of this audit was
to evaluate general controls. The scope of our audit
included general security, access controls, program
maintenance, systems software, systems development,
physical security, operations procedures, and disaster
recovery. We found several weaknesses in access
controls.
IS Audit: Elizabeth City State University
– General Controls Review
IS conducted a general controls audit at
Elizabeth City State University. The scope of the
audit included general security, access controls,
program maintenance, systems software, systems
development, physical security, operations
procedures, and disaster recovery. In the
general security area, we found that ECSU
had not performed a risk assessment. We also
found several weaknesses in access controls.
Strategic Audit Review: North Carolina
Central University
The purpose of this Strategic Audit Review was
to identify invalid social security numbers ( SSNs)
in the payroll system at NCCU and to investigate
unusual payments noted on the university payroll.
This review found that
NCCU failed to cross check
employee information
against the State Controller’s
verification report allowing
fraudulent SSNs to be used
as valid identification.
In addition, this review
found an unusually high
number of bookkeeping
errors, incomplete employee
files and one instance of
an employee receiving a
duplicate payment for services.
Information Security Vulnerability
Assessments
Funded by lapsed salaries, OSA contracted with
private firms to conduct a total of 5 vulnerability
assessments. These assessments included the
following entities: the Office of the State Auditor,
General Assembly, Department of Revenue, Office
of the State Controller, and Information Technology
Services. The purpose of these assessments were
to gauge the entities’ security posture at a given
point in time, identify security risks that might
make an entity vulnerable to attack, and determine
appropriate procedures to mitigate the identified
risks. The detailed results of the assessments are kept
confidential as to not announce control weaknesses
to would- be intruders. General results containing
the numbers of high, medium and low weaknesses
are released to the public through OSA’s website
and electronic posting service.
IS Division auditors are
in a unique position to
think proactively about
discovering suspicious
data trends flowing from
an agency’s information
systems.
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Decreasing risk through proactive measures
OSA’s Performance Audit Division was designed to allow for flexible deployment of resources while upholding strict auditing standards. Unlike prescheduled financial audits, the subjects of performance audits are chosen at the discretion of the State Auditor upon consideration of two factors: greatest risk potential and greatest opportunity for impact. Upon release, performance audits provide the public, agency managers and program managers with an objective analysis of whether State agencies efficiently and effectively manage their programs and activities. Furthermore, these audits are of particular value to legislators who must consider the effectiveness of State programs in funding decisions and to the taxpayers who pay for those programs.
OSA’s efforts in the Performance Audit Division during 2006 revolved around retooling its work to produce reports that are narrower in scope and target specific programs or areas where the state is at greatest risk. We reassigned one of our most experienced financial audit managers to this section and scheduled training for the Division’s auditors and staff. Ten days of intensive training instructed auditors how to develop a comprehensive plan for conducting risk- based audits, how to correctly identify risk and vulnerabilities and how to develop measurement based audit objectives. This reengineering of the Performance Audit Division will result in value- added audits that focus on proactive issues and strengthen the watchdog function in State government.
In 2007, the Performance Audit Division will take on increased activity. Building on the Division’s additional auditing experience and training, OSA will maximize its efforts by directing some of the AuditWatch efficiency gains to do more performance audits. A good example of the type of proactive audits this Division will perform is the audit on the internal audit function in North Carolina agencies and institutions.
The following are summaries of the Performance Audit Division’s audit reports:
Internal Auditing In North Carolina Agencies and Institutions
This performance audit was statewide in scope and had two objectives. First, we sought to determine whether State agencies, universities, and community colleges had sufficient internal audit resources. Second, we assessed the level of compliance that existing internal audit functions achieved with generally recognized internal audit principles and best practices.
The audit found that the State’s internal audit function is inadequately staffed and is in need of more direct guidance from the General Assembly. For example, many state entities had no internal audit function, others were inadequately staffed and others lacked the expertise needed to meet the challenges presented by their organizations. Furthermore, no universal State criteria or minimum standards exist regarding the establishment of activity, authority or responsibilities of an internal audit function.
Performance Audit Division
Annual Report 2006 | Performance Audit Division North Carolina Office of the State Auditor
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Decreasing risk through proactive measures
Medicaid Prescription Drug Costs
The purpose of this performance audit was to determine why Medicaid prescription drug costs are increasing and whether the cost containment measures initiated by the Division of Medical Assistance were effective.
The audit revealed a number of factors that affected the increased total gross costs of Medicaid prescription drugs. One factor was the increased price for drugs, accounting for approximately 5% of the total annual increase. Other factors were: increasing number of recipients, increasing number of prescriptions per recipient, and increasing the use of managing care methods designed to keep recipients out of institutional settings.
The Division of Medical Assistance had been proactive in identifying and implementing various cost containment measures for the prescription drug program, avoiding an estimated $ 250 million in costs for the State since fiscal year 2002. Specific measures included expanding certain cost containment measures, changing the criteria used in other cost containment programs, and closer examination of cost containment measures utilized by other states.
Driver’s Licensing Process
The purpose of this audit was to determine whether the Division of Motor Vehicles had sufficient procedures in place to ensure that only qualified applicants received a driver’s license, and to determine whether regulations were consistently enforced in driver license offices throughout the State.
This audit found that the State’s procedures were neither sufficient nor as restrictive as those of surrounding states. For example, DMV allowed unregulated interpreters to be used for non- English speaking applicants, inherent security risks existed in one- person offices, mobile licensing units lacked the ability to handle current technology, and communication to the public needed to be improved. Specific findings also included the following: information provided to examiners by management was not timely, weak controls over information input into the Division’s computer system, and inconsistent treatment of field office customers.
Child Caring Institutions
The objectives of this audit were to examine the cost allocation processes of child caring institutions, evaluate administration rates, review the institutions’ utilization rates, examine the rate- setting methodology, and make recommendations on ways to improve the rate- setting process.
We found that the rate- setting methodology did not provide child caring institutions with any incentives to contain costs. Most of the institutions participating in the Title IV- E program were provided rates that enabled them to have most of their allowable costs reimbursed. This methodology rewarded institutions for spending additional dollars and produced a wide range of reimbursement rates among institutions providing similar program services. DHHS’ rate- setting methodology also resulted in an over allocation of $ 400,000 in indirect administration costs to the foster care program. Also, we found that the per diem reimbursement rate for the foster care program could decrease significantly if more of the bed- day capacity of the institutions were utilized.
Oversight of the rate- setting process was lacking and hampered by program complexity, inadequately written procedures and processing delays. There was very little evidence that analytical reviews, cost analysis and comparisons, inquires or any other form of rate management was employed by the Department of Health and Human Services.
Northeastern North Carolina Regional Economic Development Commission
The counties of North Carolina are organized into seven regional partnerships the purpose of which is to promote economic development in their respective regions. Northeastern North Carolina Regional Economic Development Commission/ Partnership is the regional entity designated to market the northeastern area of the State.
The objective of this audit was to determine whether resources provided by the State were used in a prudent business manner for their intended purpose of furthering economic development in the region.
The audit found that the organization’s president created a conflict of interest when he expended resources for the benefit of his future employer. The organization made significant unjustified bonus payments to its employees, employees of the North Carolina Department of Commerce, and to several of the organization’s independent contractors. The organization’s process of selecting contractors did not provide assurance that the organization contracted with the most qualified and at the best possible price. Many of the organization’s employment and consulting contracts contained terms that could adversely affect the organization’s operations and finances and they lacked adequate protection of the organization’s interests. The Board of Directors did not sufficiently exercise its fiduciary responsibilities to monitor operations and ensure funds were used prudently.
Annual Report 2006 | Performance Audit Division
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Decreasing risk through proactive measures
Originally printed in News and Observer on 4/ 14/ 06 and reprinted with permission North Carolina Office of the State Auditor
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Decreasing risk through proactive measures
Staff in the Financial Audit Section audit state agencies, universities, community colleges, clerks of superior court, and Smart Start nonprofit organizations. The State Auditor is required to perform these audits as part of the statutory responsibilities or to comply with federal requirements. Some audits are performed at the State Auditor’s discretion to ensure that all agencies are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest percentage of hours ( 38%) to perform annual financial statement audits/ reviews of the State’s sixteen universities and fifty- eight community colleges. One of its largest financial audits is the state’s Comprehensive Annual Financial Report ( CAFR), which accounted for 14% of staff hours. The CAFR contains the annual financial statements for the state of North Carolina as a whole.
Another major financial audit project, accounting for 20% of staff time, is the state’s Single Audit Report. The Single Audit Report contains the results of the audit of the state’s financial statements and the audit of the state’s compliance with laws and regulations pertaining to federal grant programs. The office also periodically audits selected fiscal controls of clerks of superior court and general government agencies.
The audit staff also conducts financial and compliance audits of the organizations participating in the Smart Start program, including the statewide coordinating agency ( the North Carolina Partnership for Children, Inc.) and the individual local partnerships. Smart Start is an early childhood development program designed to prepare children to begin school healthy and ready to succeed. Currently, 80 Smart Start partnerships operate throughout the state.
Financial Audit Results Summary 2005- 2006
For the twelfth consecutive year, the state auditor issued an unqualified opinion on the state’s financial statements. This opinion, for the fiscal year ended June 30, 2005, was contained in the CAFR prepared by the Office of the State Controller.
The State of North Carolina also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association for the twelfth consecutive year. This award is given to government units whose CAFR achieves the highest standards in government accounting and financial reporting.
In conjunction with the audit of the state’s financial statements, the state auditor issues a report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements in the Single Audit Report. Eleven findings of non- compliance and weaknesses in internal control related to the financial statement audit were reported. These findings disclosed internal control deficiencies related to investments, cash disbursements and year- end financial reporting.
With regard to compliance with federal program requirements, the state auditor issued a qualified opinion on certain federal programs due to material noncompliance with certain requirements. In total, auditors identified $ 919,500 in questioned
Financial Audit Division 14
Annual Report 2006 | Financial Audit Division
costs resulting from 75 identified audit findings.
In addition to reporting on the CAFR and Single
Audit at the statewide level, the office publishes in
separately issued reports the audit findings and
recommendations from
CAFR and Single Audit
work for each individual
government agency.
Reported findings from
university and community
college audits for fiscal
year 2005 primarily related
to four areas: access
rights, financial statement
preparation, management
oversight and internal
control weaknesses. These
internal control weaknesses
were in areas such as financial aid awards, cash
receipts and deposits, cash disbursements and
separation of duties.
In the fiscal 2005 Clerk of Superior Court audits,
OSA noted internal control weaknesses. These
internal control weaknesses were in areas such
as cash receipts and disbursements, segregation
of duties and timely deposits. To better direct
our limited staff resources, we have set a target of
auditing each Clerk of Superior Court every three
years, with cash counts at some offices every year
since clerks handle large amounts of cash.
In the 2005 fiscal control audits of general
government agencies, internal control weaknesses
were reported in such areas as cash receipts, cash
disbursements, payroll, personnel management,
inventory and grants to not- for- profit
organizations. We intend to redirect some of our
resources to agencies which have not received a
full audit in some years to increase accountability.
Smart Start findings issued during 2005- 2006
focused on internal control weaknesses, contract
management and monitoring, competitive bidding
and financial reporting. Audit reports issued
during the year ended June 30, 2006 are listed in
appendix A. This included a
total of 22 audit reports for
the fiscal year ended June
30, 2004, issued subsequent
to June 30, 2005.
For the fiscal year
ended June 30, 2005, the
Office of the State Auditor
performed 45 audits of
Smart Start partnerships.
CPA firms performed 25 of
these audits, with OSA staff
performing the remaining
20 audits. All reports were
issued by June 30, 2006.
OSA’s goal is to complete and release all 41 Smart
Start audits for the 2005- 06 fiscal year by March
31, 2007. In an effort to achieve that goal, the
audit plan for fiscal year 2006 provides for audits
to be performed by both OSA staff and contracted
Certified Public Accounting firms. CPA firms will
be selected through a bidding process and will
be contracted for a total of 25 audits ( 13 due by
November 30, 2006; 6 due by January 31, 2007; 6
due by March 15, 2007).
OSA staff will perform the remaining balance
of 16 audits, with 3 assigned Raleigh- based teams
and 13 to branch office teams. It is anticipated the
more timely release of the audit reports will allow
the North Carolina Partnership for Children and
the local partnerships to more quickly address
identified deficiencies and to make the necessary
improvements to ensure accountability of state
funds.
Decreasing risk through proactive measures
We intend to redirect
some of our resources
to agencies which
have not received a full
audit in some years
to increase
accountability.
North Carolina Office of the State Auditor
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Decreasing risk through proactive measures
The Management Services and Nongovernmental Compliance Division ( MS& NGCD), formally known as the Public Audit Interface Division, has the responsibility of increasing oversight and accountability of State and Federal pass- through grants typically given to nonprofit organizations. With the changes to the reporting requirements for grants that took effect July 1, 2005, the Auditor determined the need to have a specific division within the OSA to respond to the growing need for compliance oversight and training to adhere to new reporting requirements.
The mission for the creation of MS& NGCD was twofold. First, OSA needed to refocus its resources to increase training and “ best practices” for nonprofit organizations receiving State grants. Second, OSA needed to increase compliance and accountability of funds on the grantee and funding agency levels. The division has set measurable goals for 2007 based on the accomplishments of 2006.
OSA is proud to report that MS& NGCD has satisfied all areas of its original mission. The following is a summary of 2006 accomplishments, broken down by internal category, which has laid the foundations for our expectations in 2007:
Training
• OSA trained almost 4,000 participants in 71 training sessions between August 2005 and August 2006. This training had an immediate impact by reducing the percentage of noncompliant grantees and increasing the overall compliance percentage.
• Multifaceted training: The types of training included grants administration sessions directed at State agency personnel, grants reporting/ accountability sessions directed at grantees, special sessions conducted at the request of various groups ( e. g., DHHS and local fire departments) and presentations at 15 conferences between August 2005 and 2006.
• Web- based training resources: The Division provided templates, reference materials and training tools to all participants online.
Compliance
• Creation of monthly and annual online noncompliance lists: OSA’s efforts have reduced the number of noncompliant grantees by 29.3% and increased the overall compliance percentage to 92%.
• Timely processing of required grantee reports: The Division has shortened the time it takes to process grantee reports from a 5- month backlog to processing within approximately 3 days of receipt.
• Web- based reporting program: The Division is in the process of streamlining the grant reporting process through a web- based program. When complete, we expect the new process to eliminate redundancy, increase data capture efficiency, and improve reporting timeliness.
Management Services &
Nongovernmental Compliance Division 16
Annual Report 2006 | Management Services & Nongovernmental Compliance Division
Best Practices and Research Assistance
• Quarterly Best Practices newsletter: This
newsletter updates grantees on state grant
requirements, potential financial accountability
problems and developing adequate internal
policies and accounting controls.
• Research and reporting assistance: The Division
provides assistance on unique, confusing and
complicated questions
related to grants reporting
via telephone or email.
• Current documents and
formats: The Division
provided grantees
and funding agencies
information on required
grant reporting documents
and formats through
developing, updating and
maintaining online forms.
Agency and Grantee
Reviews
• Agency and grantee
review function: The
Division created an agency and grantee review
function to promote public confidence in the
expenditure of State grants while examining
potential problems.
• Standards for conducting agency and
grantee reviews: The Division set standards
for identifying factors that trigger a review,
determined what issues to investigate, and
proposed formats for reporting the results.
• Review process as training tool: The Division
used the review process to educate agency
personnel on monitoring techniques and to
suggest improvement to those techniques.
In addition, this review process provides an
excellent opportunity to provide best practice
information on improving accountability to
grantees.
Special Projects
• Legislative/ nonprofit conflict of interest form: The
Division developed and distributed a legislative/
nonprofit conflict of interest
form and is creating a
searchable database for this
information ( 19 legislators
have responded through
August 2006).
• Statewide customer
service function: The
Division is formulating,
coordinating, and overseeing
a process to develop and
implement a statewide
customer service function
that will encompass all State
agencies.
• Audit findings
database: The Division is
updating and maintaining an audit findings
database to identify problem trends at State
agencies. This database will assist in internal
audit planning and the identification of best
practices to share with State agency and grantee
personnel.
Going into 2007, OSA is in a good position to
increase training, compliance and accountability
for nonprofit organizations that receive grants.
Directing some of the AuditWatch efficiency
gains to MS& NGCD makes sense because of the
growing number of nonprofits and the need for
Decreasing risk through proactive measures
OSA trained almost 4,000
participants in 71 training
sessions between August
2005 and August 2006.
OSA’s efforts have reduced
the number of noncompliant
grantees by 29.3% and
increased the overall
compliance percentage to
92%.
North Carolina Office of the State Auditor
17
Decreasing risk through proactive measures
oversight. OSA already has the infrastructure in place through existing branch office staff that could be retrained to review nonprofits in their surrounding geographic areas. In addition to reviewing and informing nonprofits of best practices, OSA will focus on the grantor agency, its true “ client” in the transaction.
Compliance reporting and subsequent processing is an important bench mark in how effective MS& NGCD is at compliance and accountability. While OSA cannot control the number of reports it receives, it can control its efficiency in regard to bringing noncompliant grantees into compliance. The number of noncompliant grantees ebbs and flows with reporting deadlines, but the Division’s goal is to reduce the peak number of noncompliant grantees by 30%. That goal represents a reduction of 137 noncompliant grantees by the end of next fiscal year.
Coordinating and cooperating with the grantor agency is of paramount importance to successfully monitor and review nonprofits and their grantor agencies. OSA has already seen a spike in activity evidenced by the Division posting 8 grantee reviews; in October 2006. OSA’s goal is to release 24 grantee reviews, however, that number could be as high as 40 by the end of this fiscal year. In an effort to help train agency monitors to be proactive thinkers, OSA plans to complete monitoring reviews of grantor agencies. OSA’s goal is to complete 12 agency monitoring reviews by the end of next fiscal year.
Training is an important function of MS& NGCD and OSA plans to continue its record breaking efforts in 2007. We plan to maintain our high paced training schedule but increase our efficiency and effectiveness. An important part of training is providing information to grantees and grantors that is relevant to their particular circumstances. To aid in this effort, OSA will continue to issue its Best Practices quarterly newsletter and identify other efforts to benefit both grantors and grantees.
Officefficefficefficeffice ofof thethethe statestatestatestate auditorauditorauditorauditorauditorauditorauditor mainmainmainmain officeofficeofficeofficeofficeoffice andandand branchbranchbranchbranchbranchbranch locationslocationslocationslocationslocationslocationslocationslocationslocations
Morganton
AshevilleCharlotteFayettevilleWilmingtonGreenvilleElizabeth CityRaleighGreensboroWinston- Salem 18
Annual Report 2006 | Investigative Division
OSA’s Investigative Division is one of the most effective tools for investigating allegations of fraud, waste and abuse of State resources. Relying on State constitutional and statutory authority, this arm of OSA uncovers government waste and decreases the risk of future waste through proactive measures.
The majority of tips that lead to investigations come from OSA’s 24- hour, toll- free hotline [ 1- 800- 730- TIPS ( 8477)]. This Hotline is designed for state employees and the general public to report activities they believe may be illegal or improper. Allegations of fraud, waste and abuse may also be reported by traditional mail or via email at hotline@ ncauditor. net.
To protect the integrity of tips, allegations of improper governmental activities are strictly confidential. In addition, state law provides protection from retaliation or discrimination for whistleblowers who report improper or illegal activities to the State Auditor.
We have made great strides in detecting and preventing fraud, waste and abuse of State resources in 2006. We built on our 2005 accomplishments by reducing the number of open cases, completing cases with greater efficiency which reduced the average age of cases, while simultaneously investigating newly reported allegations.
Comparing fiscal 2006 with fiscal 2005, we reduced the number of open cases by 42% ( 45 from 78). This is a substantial accomplishment of increased efficiency given the fact that we received 137 new cases during this fiscal year ( 5% increase over 2005). Consistent with these numbers is the decrease in the average case age. In 2005, the average case age was almost a whole year. By 2006 FYE, we reduced the average case age to 226 days, a reduction of over 26%.
The goals for 2007 are to effectively promote the State Auditor’s Hotline, integrate investigators into a team- centered approach with other divisions, and instill more flexibility to enable the handling of multiple investigations simultaneously.
The promotion of the State Auditor’s Hotline is mandated by statute and has proven to be the tip source for the majority of investigations leading to direct savings for the taxpayers. This one area is unique in that money spent to promote the Hotline will likely reap a far greater amount in savings to the taxpayers when fraud, waste and abuse of their money is uncovered. In 2007, OSA plans to unveil a plan promoting the State Auditor’s Hotline using all available tools and resources.
Now that the Investigative Division is mostly caught- up on the inherited backlog of cases, focus can now be directed toward integrating Investigators into audit teams staffed by Performance and Financial Divisions. To proactively reduce waste in State government, audit teams must possess an investigative eye. In 2007, OSA will be working to build a team- centered auditing approach where the Investigative Division plays an important role in proactively looking for fraud, waste and abuse of taxpayers’ money.
A portion of the AuditWatch efficiency gains will be put to good use in the Investigative Division. Because promotion of the Hotline will result in more tips, more investigators will be needed as part
Investigative Division
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures
19
of other auditing teams. OSA plans to add more supervisor positions to the Investigative Division in 2007. OSA believes this will bring greater flexibility to investigations and allow the Division to handle multiple investigations simultaneously.
The following are summaries of the more notable cases in fiscal year 2005 – 2006. A complete list of reports is detailed in Appendix A.
NORTH CAROLINA DEPARTMENT OF
INSURANCE— RAD TRUST
The Office of the State Auditor received allegations that Department of Insurance personnel and Regulatory Actions Division ( RAD) Trust management mismanaged the assets of London Pacific Life & Annuity Company, an insurance company in receivership due to financial problems. Allegations included the improper disposal of assets, unnecessary purchases, wasteful expenditures, and lack of required reporting to the Wake County Superior Court.
Auditors substantiated many of the allegations and investigated other issues that arose during the course of the audit. The investigation resulted in 15 findings involving failure to follow state rules and regulations, failure to file required quarterly reports to the courts, inadequate supporting documentation, co- mingling of agency and estate assets, failure to obtain bids or quotes, excessive purchases, inadequate policies and procedures, and lack of accounting controls.
NORTH CAROLINA COMMUNITY
COLLEGE SYSTEM
As a result of the following reports, OSA met with the Community College Task Force to highlight the various oversight issues. The Task Force established a proactive, system- wide response to train college staff to avoid repeating these mistakes.
Blue Ridge Community College
During our annual financial audit of Blue Ridge Community College, auditors uncovered several problem areas and referred these issues to the Investigative Audit Division. These problem areas included: internal control weaknesses; potential misuse of work- study payments; and the issuance of a check to a private business lacking adequate supporting documentation.
The special review resulted in eight findings that detailed the lack of internal controls, conflicts of interest, apparent falsification of documents, diversion of student loan funds to a private business, and inadequate oversight.
Halifax Community College
The North Carolina Community College System referred a number of allegations of misconduct concerning the President of Halifax Community College to the OSA. The allegations included falsification of travel records, creation of a hostile work environment, and using College resources for personal and political gain.
Upon investigation, auditors reported the following findings: the President’s contract was approved without advance notice of significant contract amendments, the President received questionable payments for insurance- related fringe benefits and travel expense reimbursements, the President’s executive secretary deleted files from her computer despite Halifax Community College receiving a cease and desist letter from the State Auditor, the automotive tech instructor performed automotive services for the President’s personal vehicle outside of 20
Annual Report 2006 | Investigative Division
classroom instruction, and the President authorized the lease of Halifax Community College property without obtaining approval from the State Board of Community Colleges.
Wake Technical Community College ( WTCC) Board of Trustees
Investigators received tips from the State Auditor’s Hotline about conflicts of interest in the lease of a building owned by a Trustee’s family member to WTCC. In addition, investigators discovered that in a separate transaction, a different WTCC trustee personally benefited from the sale of land to the College.
Auditors confirmed the conflict of interest with evidence that WTCC entered into a three- year lease agreement with a WTCC Trustee’s family member and the Board of Trustees approved the lease agreement with no indication that the Trustee abstained from voting.
Auditors confirmed an additional conflict of interest with evidence that the former Chairman of the Board of Trustees was a principal owner of a company hired to purchase land and construct a training center for the College. The former Chairman acknowledged receiving financial gain from the sale of the property which was in direct violation of State law.
NORTH CAROLINA MUSEUM OF ART
The Office of the State Auditor received allegations through the State Auditor’s Hotline that North Carolina Museum of Art employees received bonuses in the form of salary supplements from the North Carolina Museum of Art Foundation, Inc.
Auditors discovered that at least 58 Museum and foundation employees received salary supplements dating as far back as 1998. The total compensation paid to the Director of the Museum of Art exceeded the amount set forth in legislation and the Director entered into a consulting agreement with the Museum of Art Foundation without obtaining written approval from the Secretary of the Department of Cultural Resources.
Other findings included: the Department of Cultural Resources allowed unauthorized Museum of Art Foundation compensation supplements for the Director and Assistant Director of Marketing to be processed through the State Retirement System, the Museum of Art Foundation may have violated federal tax regulations by executing employment contracts with State employees and reporting their earnings as non- employee compensation, the North Carolina Museum of Art and the Museum of Art Foundation were integrated into a hybrid organization
STONE COLD CHEMICALS, INC.
The Office of the State Auditor received information concerning an out- of- state business named Stone Cold Chemicals, Inc., that was under investigation in a number of states. Stone Cold Chemicals was shut down in Florida and Georgia after investigators in those states determined the company sold products at inflated prices and provided gifts to state purchasing agents in return for placing orders. Records seized from Stone Cold Chemicals indicated that employees of North Carolina government agencies may have also received gifts for purchases from the company.
Our investigation revealed seven Department of Transportation employees and an Appalachian State University employee authorized purchases from Stone Cold Chemicals at up to six times the market
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures 21
price and received gifts in return. During the course
of these investigations, we discovered that Stone
Cold Chemicals also solicited a significant volume of
business from local governments in North Carolina.
Auditors concluded that the
acceptance of gifts in return
for placing orders was a
violation of State law and
referred these issues to local
and state law enforcement
authorities. Our investigators
also identified a number of
local law enforcement, other
agencies and organizations
who had made questionable
purchases from Stone Cold
Chemicals. We forwarded
information to the appropriate
agencies.
NORTH CAROLINA
EASTERN REGION
DEVELOPMENT COMMISSION
The Office of the State Auditor received a number
of allegations concerning the financial management
and oversight of North Carolina’s Eastern Region,
an economic development partnership. Auditors
substantiated allegations regarding lack of
oversight, inadequate documentation, duplicate
payments, under- reporting of interest income,
and the misclassification of an employee for tax
purposes.
Auditors determined the Eastern Region
Development Commission did not exercise
adequate oversight and monitoring of the Eastern
Region’s Marketing and Client Development
activities. The special review revealed the
Executive Director was reimbursed for expenses
that were inconsistent with locations of travel and
were without adequate supporting documentation.
Moreover, auditors discovered the Eastern Region
under reported interest earned on its initial state
appropriation and the
Business Development
Consultant was paid twice
for the same expenses.
NORTH CAROLINA
DEPARTMENT OF
PUBLIC INSTRUCTION
Investigators received
allegations that the
Department of Public
Instruction’s Reading First
Section Chief maintained
a special fund outside of
the Department of Public
Instruction with a vendor for
the Reading First program
and used this special fund to make unnecessary
disbursements including payments to the Section
Chief ’ s children. The special review resulted in
seven findings regarding operation of the special
fund, noncompliance with procurement and travel
policies, and unnecessary expenditures.
Auditors recommended the transfer of funds
to the Department of Public Instruction general
fund bank account and management comply with
departmental policy and state law. Additionally,
auditors recommended the Section Chief
reimburse the Department of Public Instruction
for inappropriate travel reimbursements and
submit documentation to properly establish staff
duty stations.
The promotion of the
State Auditor’s Hotline is
mandated by statute and has
proven to be the tip source for
the majority of investigations
leading to direct savings for
the taxpayers
22
Annual Report 2006 | Investigative Division
EMPLOYMENT SECURITY COMMISSION
Auditors received allegations through the State Auditor’s Hotline that an employee with a criminal record for false pretenses and cheats was granted access to confidential employee information at the Employment Security Commission. The Office of State Personnel confirmed the employee had access to the Personnel Management Information System which contains social security numbers, dates of birth, and compensation data for every current and former employee of the Employment Security Commission. The employee was serving an active prison sentence and participating in the Department of Correction’s work- release program through his position with the Employment Security Commission’s personnel section.
Auditors concluded his access to this information, based on his criminal background and work- release status, created an unnecessary risk for the Employment Security Commission and its employees. Additionally, the employee used his state- issued computer to excessively visit internet dating sites. Auditors recommended the Employment Security Commission take disciplinary action against the employee and review the process for granting access to confidential personnel information.
NORTH CAROLINA DEPARTMENT OF STATE TREASURER
Auditors received allegations through the State Auditor’s Hotline that the former Chief Deputy of the Department of State Treasurer used state resources for political purposes. Auditors discovered the former Chief Deputy used the agency’s computer resources to maintain and process documents related to political activities. Analysis of the Department of State Treasurer computer network revealed more than 450 files related to campaign activities including mailings for fundraisers, contribution mailing lists, campaign event invitations, thank you letters for contributions, contribution spreadsheets, operations outlines, voting precinct data, campaign event schedules, and letters to the media. Auditors recommended the Department of State Treasurer create and implement an internal policy prohibiting the use of state resources for political activities.
NORTH CAROLINA AGRICULTURAL AND TECHNICAL STATE UNIVERSITY
Auditors received a complaint through the State Auditor’s Hotline that the former Physical Plant Manager at North Carolina Agricultural and Technical State University violated procurement policies and accepted meals from vendors. Auditors concluded the acceptance of lunches was in violation of General Statute § 133- 32 regarding gifts and favors. Auditors also discovered that the University’s policy on conflicts of interest did not adequately specify that employees involved in preparing, awarding, and supervising public contracts cannot accept gratuities. Auditors recommended management train all employees involved in contract administration about the laws involving gifts and the University revise its policy on gratuities to comply with statutes.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
Investigators received allegations through the State Auditor’s Hotline that employees of the Department of Transportation’s Materials and Test Unit violated a variety of state policies. The investigation substantiated a Soil Engineer
Decreasing risk through proactive measures North Carolina Office of the State Auditor
23
Decreasing risk through proactive measures
in the Materials and Test Unit used his state- issued wireless telephone for personal calls and the Materials and Test Unit did not have proper documentation for the use of wireless phones.
The Soil Engineer admitted he used his wireless phone to talk to his wife and individuals constructing his personal residence. Policies of the Department of Transportation, the Office of State Budget and Management, and the Office of State Personnel prohibit making personal calls on state- issued wireless phones. In addition, use of the wireless phone for personal calls contributed to the Soil Engineer exceeding the monthly plan for allowable minutes.
Auditors recommended management take appropriate action with employees who exceed the allowable minutes for wireless phones including modifying or terminating wireless contracts. Further, auditors recommended management reiterate its policies prohibiting personal use of wireless phones and seek reimbursement from the Soil Engineer for the incurred overage charges. Additionally, auditors recommended management review assignment of all wireless telephones for compliance with departmental policies and clarify types of communications devices subject to the policies.
NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES
An allegation was received through the State Auditor’s Hotline that employees of the
Department of Health and Human Services accepted gifts of material value from a computer services vendor in violation of state and departmental policies. Auditors confirmed this allegation in regards to the Deputy Secretary, the Director of the Division of Information Resource Management, and the Computer/ Telecom Services Manager.
Auditors recommended the Department of Health and Human Services ensure its employees understand and follow applicable State laws, the North Carolina Board of Ethics’ Executive Orders, and departmental policies regarding appearances of conflicts of interest and ethical conduct.
ADMINISTRATIVE OFFICE OF THE COURTS
Auditors received an allegation through the State Auditor’s Hotline concerning foreign language ( Spanish) interpreters allegedly receiving payment from non- English speaking defendants while also being paid by the State. Although auditors did not substantiate the specific allegation, we confirmed clerks of court and chief district court judges received the same concerns on a regular basis.
As a result, auditors recommended the Administrative Office of the Courts revise the form for appointing interpreters to include a certification that the interpreter has not nor will accept any other payment for the same services. In addition, auditors recommended the Administrative Office of the Courts consider requesting presiding judges to inform non- English speaking defendants and participants not to make any payment to the court- appointed interpreter and develop internal processes to monitor, audit, and investigate various interpreter concerns. 24
General Administrative Division is the nerve center for the OSA, performing three core functions. First, it coordinates OSA personnel administration from initial hiring to training and placement. Second, it manages the processing of all audits, reports and reviews. This processing entails reviewing and editing of draft copies, electronic and print shop formatting, and responding to media questions and public concerns. Third, General Administrative staff is responsible for the coordination of all OSA payroll, budget and purchasing.
Personnel
To be a proactive State agency, OSA must be a responsible manager of its personnel. After selecting the best qualified applicants, OSA must then provide quality training to employees and a quality control review of employees work product.
Recruiting
OSA developed an active program to recruit on university and college campuses around the state this year. Making informal presentations to Beta Alpha Psi meetings, accounting classes and other events blends well with our established presence at formal “ meet the firms” nights and career fairs. In addition, building relationships with campus faculty and staff helps OSA better identify applicants based on their career goals. By not positioning itself as a direct competitor with public firms or private industry, OSA has found immediate success with applicants who are interested in pursuing a career that provides a balance between their personal and professional lives.
OSA’s goal is to build relationships to target the right applicant, thus reducing turnover and eliminating the waste of resources that frequent turnover creates. OSA had a number of interns this year because of the positive relationships.
Training
To better direct resources to areas with the greatest risk, our auditors must be exceptionally well trained and cross- trained in as many areas as practical. This is challenging for our auditors but at the same time a great and exciting career opportunity. Our training department is tasked to help recruit, train and retain the best professionals possible.
In May 2006, OSA kicked- off a series of training sessions for audit productivity improvement and reengineering. OSA partnered with AuditWatch to present in- depth training for all financial audit staff with the goal of improving efficiency, improving audit quality and increasing staff morale. AuditWatch was not about implementing new standards but was about looking at our audits differently, increasing upfront planning and shortening the time from field work to final audit report. AuditWatch showed OSA more efficient methods of auditing.
In the past, OSA’s ability to follow- up on hotline tips and scrutinizing areas of State government has been limited by the number of available work hours. However, the AuditWatch program is expected to help address this problem. The efficiency rewards of implementing the AuditWatch approach are
General Administration
Annual Report 2006 | General Administration
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures 25
expected to be an approximate 25% increase in
newly available time resources. Approximately
35,000 work hours can now be redirected to
deserving projects OSA has been unable to address
in the past. In terms of human capital, these
productivity principles
could increase OSA by the
equivalent of 22 fulltime
auditor positions. These
work hours from OSA’s
Financial Division will be
reinvested in expanding
OSA’s financial auditing
reach in the Performance,
Information Systems,
Financial, Investigative,
and Management Services
and Nongovernmental
Compliance Divisions.
The improvements
gained through this audit
productivity initiative
are not just temporary ideas, but will become
permanent practices. The State Auditor appointed a
Productivity Task Force to meet regularly to ensure
OSA realizes this productivity potential on an on-going
basis. The Task Force includes personnel
throughout the Agency on active subcommittees
over specific subject areas. The subcommittee
design is to find a cross section of employees to
make recommendations to, and coordinate with,
the Task Force as we move forward into the next
fiscal year.
Quality Controls
OSA’s work product is governed by strict
adherence to professional standards promulgated
by government agencies and professional
organizations including the Government Auditing
Standards Board, the Financial Accounting
Standards Board, the Federal Office of Management
and Budget, the American Institute of Certified
Public Accountants, and various state and federal
laws and regulations. These
standards require auditors
remain independent,
receive continuing
professional education,
and address the role of
the auditee in resolving
and tracking findings and
recommendations.
OSA has a control system
to ensure the quality of
audit work. The system
includes supervisory
review of all work product
and management review
of audit reports and
critical supporting work
papers. Staff who did not participate in an audit
periodically review the work. To uphold the
standards of the supervisory review, OSA’s goal
is that all newly hired Supervisor level employees
and above have a valid CPA license, or the merit-based
equivalent in work experience.
Another layer of OSA review exists. The Agency
receives a peer review every three years under
the direction of the National State Auditors
Association. During the peer review, members
of audit staffs from other states review the office’s
quality assurance system and work papers for
compliance with auditing standards. The most
recent peer review was performed during the 2005-
2006 fiscal year and resulted in a clean opinion.
A report exposing an
instance of fraud, waste
or abuse of taxpayers’
resources, if publicized by
the statewide news media,
becomes an effective tool
for the deterrence of future
fraud, waste or abuse of
taxpayers’ resources.
26
Processing & Publicationublication
With approximately 192 OSA employees, the publishing of audits, reports and reviews is a complicated and time consuming process. Magnified by the sensitive nature of the audit subject matter, OSA’s administrative staff must be detail minded and highly organized. The goals of accuracy and timeliness are the staff’s top priorities. However without effective publication, the audit, report or review would go unnoticed.
Publication of the audits, reports and reviews is an essential part of OSA’s proactive posture. A report exposing an instance of fraud, waste or abuse of taxpayers’ resources, if publicized by the statewide news media, becomes an effective tool for the deterrence of future fraud, waste or abuse of taxpayers’ resources. OSA, through a positive relationship with the news media, can proactively deter others from committing similar acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
OSA is the taxpayer’s watchdog against wasteful spending of State resources. To be an effective messenger, OSA must ensure that its resources are spent as wisely as possible.
OSA’s appropriated budget is approximately $ 16 million and the agency bills approximately $ 3 million for federal audit work. In addition to the central office in Raleigh, OSA has 9 branch offices throughout the State which our budget office is responsible for managing financially.
Budgeting and purchasing are governed by strict rules and regulations. An independent CPA firm annually conducts a financial audit of the office and routinely issues a clean opinion of its financial statements.
Management Informationnformation Systems
The MIS Division of the Office of the State Auditor is charged with four primary objectives:
• Provide technology support for OSA auditors
• Oversight of Senate Bill 991 compliance
• Enterprise Technology planning and
implementation
• Automating OSA’s critical business function
to increase productivity
In addition to providing for the daily computing needs of OSA, the MIS Division completed several projects to enhance the efficiency and quality of the Agency. MIS participated in the ePartners program at NC State University by working with a senior design team to provide upgrades and updates of computers and field systems to save valuable travel time and expense. MIS enhanced the publishing of online audits and reports on the OSA website and worked closely with the Office of the State Controller to ensure the success of the Beacon Project ( statewide payroll application slated for implementation in 2008).
OSA’s 2007 goals for MIS are to improve the security of the Agency and prepare for future efficiency improvements. Specifically, MIS will streamline the Management Services and Nongovernmental Compliance Division’s procedures to provide timelier grant and grantee information to the public. MIS will also implement a portal- based OSA Intranet that will improve communications and collaboration within the Agency. Finally, MIS will update the computing infrastructure, replace older networking switches, increase the bandwidth to the main office, and install a comprehensive wireless networking security system.
Annual Report 2006 | Investigative Division
Decreasing risk through proactive measures North Carolina Office of the State Auditor
27
Decreasing risk through proactive measures
Report Number Title Release Date
ISA- 2007- 4160 North Carolina Office of the State Controller - Vulnerability Assessment 11/ 13/ 06
GRA- 2006- 0007 Review of Sit In Movement, Inc. - State Grant 11/ 8/ 06
GRA- 2006- 0008 Review of Bertie- Martin- Washington Community Development Corporation
State Grant 11/ 8/ 06
GRA- 2006- 0009 Review of Sandhills Mediation Center State Grant 11/ 8/ 06
ISA- 2007- 4660 North Carolina Office of Information Technology Services -
Vulnerability Assessment 11/ 7/ 06
ISA- 2007- 1000 North Carolina General Assembly - Vulnerability Assessment 11/ 2/ 06
FIN- 2006- 3000 Office of the Governor - Statewide Financial Audit Procedures 11/ 1/ 06
ISA- 2007- 3300 North Carolina Office of the State Auditor - Vulnerability Assessment 11/ 1/ 06
FIN- 2006- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 10/ 31/ 06
PER- 2006- 0215 North Carolina Highway Program Located Within the Department of
Transportation 10/ 31/ 06
GRA- 2006- 0005 Review of Hope Pregnancy Care Center- State Grant 10/ 26/ 06
GRA- 2006- 0006 Review of Western Youth Network- State Grant 10/ 26/ 06
FIN- 2006- 2139 Greene County Clerk of Superior Court - Fiscal Control Audit 10/ 24/ 06
GRA- 2006- 0001 Review of Wilson County Residential Services, Inc.- State Grant 10/ 23/ 06
GRA- 2006- 0002 Review of Marine Corp Museum of the Carolinas- State 10/ 23/ 06
GRA- 2006- 0003 Review of Club Fifteen- State Grant 10/ 23/ 06
GRA- 2006- 0004 Review of Caswell County Parish, Inc.- State Grant 10/ 23/ 06
FIN- 2006- 2188 Tyrrell County Clerk of Superior Court - Fiscal Control Audit 10/ 16/ 06
FIN- 2007- 2115 Carteret County Clerk of Superior Court - Fiscal Control Audit 10/ 16/ 06
FIN- 2006- 2133 Columbus County Clerk of Superior Court - Fiscal Control Audit 10/ 11/ 06
PER- 2006- 7216 Internal Auditing In North Carolina Agencies And Institutions 10/ 11/ 06
FIN- 2006- 2150 Johnston County Clerk of Superior Court - Fiscal Control Audit 10/ 3/ 06
FIN- 2006- 2185 Surry County Clerk of Superior Court - Fiscal Control Audit 10/ 3/ 06
SAR- 2006- 0001 North Carolina Central University - Strategic Audit Review 10/ 2/ 06
FIN- 2006- 2166 Onslow County Clerk of Superior Court - Fiscal Control Audit 9/ 28/ 06
FIN- 2005- 6850 Martin Community College - Financial Statement Audit 9/ 27/ 06
INV- 2006- 0309 North Carolina State University 9/ 20/ 06
FIN- 2006- 2108 Bladen County Clerk of Superior Court - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 2173 Pitt County Clerk of Superior Court - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 4160 Office of the State Controller - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 2112 Cabarrus County Clerk of Superior Court - Fiscal Control Audit 9/ 13/ 06
Appendix A
The following reports are listed in reverse chronological order and were issued from the begining of fiscal year 2005- 2006 through the date of this annual report: 28
INV- 2006- 0308 North Carolina Department of Transportation 9/ 13/ 06
FIN- 2006- 1000 North Carolina General Assembly - Fiscal Control Audit 9/ 12/ 06
INV- 2006- 0307 North Carolina Department of Administration - Division of Purchase
and Contract 9/ 5/ 06
FIN- 2006- 2184 Stokes County Clerk of Superior Court - Fiscal Control Audit 8/ 30/ 06
FIN- 2006- 2107 Bertie County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
FIN- 2006- 2113 Caldwell County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
FIN- 2006- 2177 Robeson County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
INV- 2006- 0306 North Carolina State University 8/ 28/ 06
FIN- 2006- 2152 Lee County Clerk of Superior Court - Fiscal Control Audit 8/ 7/ 06
NGV- 2005- 9157 Chowan- Gates- Perquimans Partnership for Children -
Financial Statement Audit 7/ 26/ 06
FIN- 2006- 2102 Alleghany County Clerk of Superior Court - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 2128 Davidson County Clerk of Superior Court - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 3510 Department of Public Instruction - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 2194 Watauga County Clerk of Superior Court - Fiscal Control Audit 7/ 24/ 06
FIN- 2006- 4500 Department of Correction - Fiscal Control Audit 7/ 24/ 06
FIN- 2006- 2105 Avery County Clerk of Superior Court - Fiscal Control Audit 7/ 21/ 06
FIN- 2006- 2180 Rutherford County Clerk of Superior Court - Fiscal Control Audit 7/ 21/ 06
ISA- 2006- 6086 Elizabeth City State University 7/ 21/ 06
NGV- 2005- 9167 Partnership for Children of Lincoln & Gaston Counties Inc -
Financial Statement Audit 7/ 21/ 06
NGV- 2005- 9185 Yadkin County Partnership for Children - Financial Statement Audit 7/ 21/ 06
INV- 2006- 0305 North Carolina Public Staff 7/ 19/ 06
FIN- 2006- 2168 Pamlico County Clerk of Superior Court - Fiscal Control Audit 7/ 17/ 06
NGV- 2005- 9155 Carteret County Partnership for Children - Financial Statement Audit 7/ 17/ 06
NGV- 2005- 9104 Cleveland County Partnership for Children Inc - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9130 Randolph County Partnership for Children - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9138 Anson County Partnership for Children - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9150 Alamance County Partnership for Children - Financial Statement Audit 7/ 12/ 06
INV- 2006- 0303 North Carolina Agricultural & Technical State University 7/ 6/ 06
INV- 2006- 0304 North Carolina Department of Health and Human Services 7/ 6/ 06
FIN- 2005- 6802 Asheville- Buncombe Technical Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6807 Brunswick Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6816 Central Carolina Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6861 Piedmont Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6864 Randolph Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 2130 Duplin County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 06
FIN- 2005- 6830 Edgecombe Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2005- 6851 Mayland Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2005- 6883 Stanly Community College - Financial Statement Audit 6/ 29/ 06
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
29
Decreasing risk through proactive measures
FIN- 2005- 6898 Wilson Technical Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2006- 2198 Yadkin County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 06
INV- 2006- 0302 Employment Security Commission 6/ 29/ 06
NGV- 2005- 9137 Wilson County Partnership for Children - Financial Statement audit 6/ 29/ 06
NGV- 2005- 9143 Guilford County Partnership for Children, Inc. - Financial Statement Audit 6/ 29/ 06
NGV- 2005- 9163 Harnett County Partnership for Children - Financial Statement Audit 6/ 29/ 06
NGV- 2005- 9102 Burke County Partnership for Children Inc - Financial Statement Audit 6/ 28/ 06
FIN- 2005- 6086 Elizabeth City State University - Financial Statement Audit 6/ 27/ 06
FIN- 2006- 2159 Mecklenburg County Clerk of Superior Court - Fiscal Control Audit 6/ 27/ 06
FIN- 2006- 2165 Northampton County Clerk of Superior Court - Fiscal Control Audit 6/ 27/ 06
NGV- 2005- 9101 North Carolina Partnership for Children Inc - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9111 Orange County Partnership for Young Children - Financial Stement Audit 6/ 27/ 06
NGV- 2005- 9139 Brunswick County Partnership for Children Inc - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9144 Hoke County Partnership for Children and Families - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9161 Franklin- Granville- Vance Partnership for Children Inc -
Financial Statement Audit 6/ 27/ 06
FIN- 2005- 6082 The University of North Carolina at Pembroke - Financial Statement Audit 6/ 26/ 06
FIN- 2005- 6843 Blue Ridge Community College - Financial Statement Audit 6/ 26/ 06
FIN- 2005- 4205 North Carolina Turnpike Authority - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6820 Cleveland Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6832 Fayetteville Technical Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6840 Halifax Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6847 Johnston Community College - Financial Statement 6/ 22/ 06
FIN- 2006- 2147 Hyde County Clerk of Superior Court - Fiscal Control Audit 6/ 22/ 06
FIN- 2006- 2195 Wayne County Clerk of Superior Court - Fiscal Control Audit 6/ 22/ 06
NGV- 2005- 9140 Bertie County Partnership for Children Inc - Financial Statement Audit 6/ 22/ 06
NGV- 2005- 9168 Madison County Partnership for Children and Families Inc 6/ 22/ 06
NGV- 2005- 9170 Mitchell- Yancey County Partnership for Children Inc - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6842 Haywood Community College - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9109 Jones County Partnership for Children - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9160 Davie County Partnership for Children Inc - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9166 Partnership for Children of Johnston County Inc - Financial Statement Audit 6/ 19/ 06
FIN- 2005- 6075 Western Carolina University - Financial Statement Audit 6/ 16/ 06
FIN- 2005- 6860 Pamlico Community College - Financial Statement Audit 6/ 15/ 06
FIN- 2005- 6868 Roanoke- Chowan Community College - Financial Statement Audit 6/ 15/ 06
FIN- 2005- 6838A GHG Construction Corporation - Financial Statement Audit 6/ 14/ 06
FIN- 2006- 2170 Pender County Clerk of Superior Court - Financial Statement Audit 6/ 14/ 06
NGV- 2005- 9122 Lenoir/ Greene Partnership for Children Inc - Financial Statement Audit 6/ 14/ 06
FIN- 2005- 6838 Guilford Technical Community College - Financial Statement Audit 6/ 13/ 06
NGV- 2005- 9124 Person County Partnership for Children - Financial Statement Audit 6/ 13/ 06
PER- 2006- 7218 Performance Audit - Child Caring Institutions 6/ 12/ 06 30
NGV- 2005- 9182 Union County Partnership for Children - Financial Statement Audit 6/ 8/ 06
NGV- 2005- 9186 Richmond County Partnership for Children - Financial Statement Audit 6/ 7/ 06
FIN- 2005- 6836 Gaston College - Financial Statement Audit 6/ 6/ 06
FIN- 2005- 6852 McDowell Technical Community College - Financial Statement Audit 6/ 6/ 06
FIN- 2005- 6896 Wilkes Community College - Financial Statement Audit 6/ 6/ 06
ISA- 2006- 6060 The University of North Carolina at Wilmington 6/ 6/ 06
INV- 2006- 0301 North Carolina’s Eastern Region 6/ 5/ 06
NGV- 2005- 9153 Bladen County Partnership for Children Inc - Financial Statement Audit 6/ 5/ 06
NGV- 2005- 9176 Montgomery County Partnership for Children - Financial Statement Audit 6/ 5/ 06
FIN- 2006- 2120 Chowan County Clerk of Superior Court - Fiscal Control Audit 6/ 1/ 06
FIN- 2006- 2169 Pasquotank County Clerk of Superior Court - Fiscal Control Audit 6/ 1/ 06
NGV- 2005- 9119 Durham Partnership for Children - Financial Statement Audit 5/ 31/ 06
NGV- 2005- 9115 Avery County Partnership for Children 5/ 30/ 06
NGV- 2005- 9175 Polk County Partnership for Children Inc. - Financial Statement Audit 5/ 30/ 06
NGV- 2005- 9180 Smart Start of Transylvania County - Financial Statement Audit 5/ 30/ 06
FIN- 2005- 6812 Carteret Community College - Financial Statement Audit 5/ 24/ 06
FIN- 2005- 6055 The University of North Carolina at Asheville - Financial Statement Audit 5/ 23/ 06
FIN- 2005- 6890 Wake Technical Community College - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9136 Washington County Child Advocacy Council Inc. - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9146 Lee County Partnership for Children - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9152 Beaufort/ Hyde Partnership for Children - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9171 Northampton Partnership for Children Inc. - Financial Stament Audit 5/ 23/ 06
FIN- 2006- 2114 Camden County Clerk of Superior Court - Fiscal Control Audit 5/ 18/ 06
FIN- 2005- 6846 James Sprunt Community College - Financial Statement Audit 5/ 16/ 06
FIN- 2005- 6870 Robeson Community College - Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9103 Caldwell County Smart Start A Partnership for Young Children -
Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9108 Hertford County Partnership for Children Inc. - Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9132 Rutherford County Partnership for Children Inc. - Financial Statement Audit 5/ 16/ 06
FIN- 2005- 6866 Richmond Community College - Financial Statement Audit 5/ 9/ 06
NGV- 2005- 9151 Alexander County Partnership for Children - Financial Statement Audit 5/ 9/ 06
NGV- 2005- 9164 Henderson County Partnership for Children - Financial Statement Audit 5/ 9/ 06
FIN- 2005- 6884 Surry Community College - Financial Statement Audit 5/ 8/ 06
NGV- 2005- 9184 The Partnership for Children of Wayne County, Inc - Financial Statement Audit 5/ 8/ 06
FIN- 2005- 6814 Catawba Valley Community College - Financial Statement Audit 5/ 4/ 06
FIN- 2005- 6874 Rowan- Cabarrus Community College - Financial Statement Audit 5/ 4/ 06
FIN- 2006- 2138 Granville County Clerk of Superior Court 5/ 4/ 06
ISA- 2006- 6090 North Carolina Central University 5/ 3/ 06
INV- 2006- 0300 North Carolina Department of Public Instruction 5/ 2/ 06
NGV- 2005- 9129 Pamlico Partnership for Children, Inc. - Financial Statement Audit 4/ 27/ 06
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
31
Decreasing risk through proactive measures
INV- 2006- 0299 North Carolina Department of State Treasurer 4/ 26/ 06
FIN- 2005- 6088 Fayetteville State University - Financial Statement Audit 4/ 20/ 06
FIN- 2005- 6070 North Carolina Agricultural & Technical State University 4/ 12/ 06
FIN- 2005- 8730 Single Audit Report for Year Ended June 30 2005 4/ 12/ 06
PER- 2006- 7217 Northeastern North Carolina Regional Economic Development Commission 4/ 12/ 06
FIN- 2005- 4900 Crime Control and Public Safety Department of 4/ 10/ 06
FIN- 2005- 6810 Cape Fear Community College 4/ 7/ 06
FIN- 2005- 3510 Public Instruction Department of 4/ 6/ 06
FIN- 2005- 4410 Health and Human Services Department of 4/ 6/ 06
FIN- 2005- 4650 Employment Security Commission 4/ 6/ 06
FIN- 2005- 3800 Labor Department of 4/ 5/ 06
FIN- 2005- 4200 Transportation Department of 4/ 5/ 06
FIN- 2005- 4300 Department of Environment and Natural Resources Statewide Financial
Audit Procedures 4/ 5/ 06
FIN- 2005- 4600 Commerce Department of 4/ 5/ 06
FIN- 2005- 6800 Community College Department of 4/ 5/ 06
FIN- 2005- 6828 Durham Technical Community College 4/ 5/ 06
NGV- 2005- 9114 Ashe County Partnership for Children 4/ 5/ 06
NGV- 2005- 9117 Chatham County Partnership for Children 4/ 5/ 06
FIN- 2005- 8410 NC Teacher and State Employees Comprehensive Major Medical Plan 3/ 29/ 06
FIN- 2005- 6804 Beaufort County Community College 3/ 20/ 06
FIN- 2005- 6060 UNC - Wilmington 3/ 13/ 06
FIN- 2005- 4160 Controller Office of the State 3/ 9/ 06
FIN- 2005- 6808 Caldwell Community College and Technical Institute 3/ 8/ 06
FIN- 2005- 8025 Boards and Commissions 3/ 8/ 06
INV- 2006- 0298 Stone Cold Chemicals, Inc. 3/ 2/ 06
INV- 2006- 0297 Duplin County Board of Education 3/ 1/ 06
FIN- 2005- 6050 UNC- Charlotte 2/ 28/ 06
FIN- 2005- 6084 Winston Salem State University 2/ 28/ 06
FIN- 2005- 6020 UNC- Chapel Hill 2/ 23/ 06
FIN- 2005- 6824 Craven Community College 2/ 22/ 06
INV- 2006- 0296 Appalachian State University 2/ 22/ 06
FIN- 2005- 8560 Wireless Emergency Telephone System Fund 2/ 21/ 06
INV- 2006- 0295 North Carolina Department of Transportation 2/ 20/ 06
PER- 2006- 7901 Follow- up Report on Findings From 2005 Audit Reports and Reviews 2/ 17/ 06
FIN- 2005- 3400 Treasurer Department of the State CAFR/ Single Audit 2/ 13/ 06
FIN- 2005- 6882 Southwestern Community College 2/ 13/ 06
FIN- 2005- 8530 North Carolina Global Transpark Authority 2/ 6/ 06
INV- 2006- 0294 Onslow County Schools 2/ 3/ 06
FIN- 2005- 4660 Information Technology Services 1/ 27/ 06 32
FIN- 2005- 6095 UNC Hospitals NC Memorial Hospital 1/ 27/ 06
FIN- 2005- 4407 Butner Town of 1/ 25/ 06
FIN- 2006- 2153 Lenior County Clerk of Superior Court 1/ 24/ 06
INV- 2006- 0293 North Carolina Museum of Art 1/ 24/ 06
INV- 2006- 0292 Wake Technical Community College Board of Trustees 1/ 23/ 06
INV- 2006- 0291 North Carolina State Education Assistance Authority 1/ 19/ 06
FIN- 2005- 6030 North Carolina State University 1/ 18/ 06
FIN- 2005- 6040 UNC- Greensboro 1/ 18/ 06
FIN- 2005- 6065 East Carolina University 1/ 18/ 06
FIN- 2005- 6080 Appalachian State University 1/ 18/ 06
INV- 2006- 0290 Blue Ridge Community College 1/ 18/ 06
INV- 2006- 0289 UNC Math and Science Education Network 1/ 12/ 06
INV- 2006- 0288 UNC- Chapel Hill School of Education Foundation 1/ 10/ 06
INV- 2005- 0287 North Carolina Agricultural & Technical State University 1/ 4/ 06
FIN- 2005- 4620 NC Ports Authority 12/ 29/ 05
INV- 2005- 0286 North Carolina Board of Electrolysis Examiners 12/ 16/ 05
FIN- 2005- 6092 NC School of the Arts 11/ 29/ 05
FIN- 2005- 4464 Health and Human Service Department of 11/ 18/ 05
FIN- 2005- 4700 Revenue Department of 11/ 16/ 05
FIN- 2005- 8303 Battleship Commission 11/ 1/ 05
FIN- 2006- 2146 Hoke County Clerk of Superior Court 11/ 1/ 05
INV- 2005- 0284 North Carolina Community Colleges 10/ 25/ 05
INV- 2005- 0285 Halifax Community College 10/ 25/ 05
FIN- 2005- 4500 Correction Department of 10/ 19/ 05
FIN- 2006- 2162 Moore County Clerk of Superior Court 10/ 19/ 05
FIN- 2006- 2142 Harnett County Clerk of Superior Court 10/ 3/ 05
FIN- 2005- 2144 Henderson County Clerk of Superior Court 9/ 27/ 05
ISA- 2005- 4660 The Office of the Governor 9/ 21/ 05
INV- 2005- 0283 North Carolina Department of Insurance - RAD Trust 9/ 19/ 05
NGV- 2004- 9120 Down East Partnership for Children 9/ 16/ 05
INV- 2005- 0279 North Carolina General Assembly, with Attorney General Opinion 9/ 12/ 05
FIN- 2005- 2000 Administrative Office of the Courts 9/ 6/ 05
NGV- 2004- 9145 Iredell County Partnership for Young Children, Inc. 9/ 2/ 05
NGV- 2004- 9149 Rowan County Partnership for Children, Inc. 9/ 2/ 05
NGV- 2004- 9172 Onslow County Partnership for Children, Inc. 9/ 2/ 05
NGV- 2004- 9110 Mecklenburg County Partnership for Children 8/ 31/ 05
NGV- 2004- 9141 Columbus County Partnership for Children, Inc. 8/ 31/ 05
NGV- 2004- 9183 Children’s Council of Watauga County, Inc. 8/ 31/ 05
FIN- 2004- 6854 Montgomery Community College 8/ 30/ 05
FIN- 2005- 4305 Clean Water Management Trust Fund 8/ 30/ 05
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
33
Decreasing risk through proactive measures
NGV- 2004- 9107 Halifax- Waren Smart Start Partnership for Children, Inc. 8/ 29/ 05
NGV- 2004- 9142 Dare County, Children and Youth Partnership for 8/ 29/ 05
NGV- 2004- 9128 New Hanover County Partnership 8/ 26/ 05
NGV- 2004- 9127 Buncombe County Partnership 8/ 25/ 05
FIN- 2005- 2154 Lincoln County Clerk of Superior Court 8/ 24/ 05
FIN- 2005- 2155 Macon County Clerk of Superior Court 8/ 24/ 05
FIN- 2005- 2189 Union County Clerk of Superior Court 8/ 24/ 05
NGV- 2004- 9105 Partnership for Children of Cumberland County, Inc. 8/ 24/ 05
NGV- 2004- 9121 Smart Start of Forsyth County 8/ 24/ 05
NGV- 2004- 9154 Cabarrus County Partnership for Children 8/ 24/ 05
FIN- 2004- 6868 Roanoke- Chowan Community College 8/ 23/ 05
FIN- 2005- 2122 Cleveland County Clerk of Superior Court 8/ 23/ 05
NGV- 2004- 9126 Alleghany County Partnership for Children, Inc. 8/ 23/ 05
NGV- 2004- 9178 Sampson County Partnership for Children 8/ 23/ 05
INV- 2005- 0282 Administrative Office of the Courts 8/ 17/ 05
FIN- 2004- 6801 South Piedmont Community College 8/ 15/ 05
FIN- 2004- 8550 NC Agricultural Finance Authority 8/ 15/ 05
NGV- 2004- 9156 Caswell County Partnership for Children 8/ 15/ 05
FIN- 2005- 2100 Alamance County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2116 Caswell County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2118 Chatham County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2156 Madison County Clerk of Superior Court 8/ 8/ 05
NGV- 2004- 9135 Wake County SmartStart 8/ 8/ 05
NGV- 2004- 9169 Martin- Pitt County Partnership for Children, Inc. 8/ 8/ 05
FIN- 2005- 2145 Hertford County Clerk of Superior Court 7/ 29/ 05
NGV- 2004- 9131 Robeson County Partnership for Children 7/ 26/ 05
NGV- 2004- 9118 Duplin County Partnership for Children 7/ 21/ 05
NGV- 2004- 9133 Stokes County Partnership for Children 7/ 21/ 05
PER- 2005- 0214 Drivers Licensing Process 7/ 20/ 05
FIN- 2005- 2192 Warren County Clerk of Superior Court 7/ 15/ 05
FIN- 2005- 4463 Health and Human Services, Department of 7/ 15/ 05
FIN- 2005- 2191 Wake County Clerk of Superior Court 7/ 8/ 05
FIN- 2004- 6090 North Carolina Central University 7/ 7/ 05
INV- 2005- 0280 North Carolina Department of Transportation 7/ 1/ 05
INV- 2005- 0281 North Carolina Department of Health and Human Services 7/ 1/ 05
ISA- 2005- 6800 Audit of the Information System General Controls of the North Carolina
Community College System 7/ 1/ 05
PER- 2005- 0213 Performance Review of Medicaid Prescription Drug Costs 7/ 1/ 05 34
The OSA independently evaluates the state’s fiscal accountability and public program performance for North Carolina’s citizens and others. The office strives to assure that state government is executing its management responsibilities in compliance with applicable laws, rules, regulations, and policies. The office also evaluates whether sufficient management controls and policies exist to enable state agencies to most efficiently and effectively use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1- 64.14 set forth the duties and responsibilities of the State Auditor, and requires the State Auditor be independent of the organizations being audited. These statutes mandate that all state agencies and entities partially or entirely supported by public funds be subject to audit by the state auditor. These audits independently evaluate public program performance for the General Assembly, Governor, executive departments and agencies, governing bodies, and the general public. Specifically, the State Auditor independently examines and makes findings of fact on whether State agencies:
■ established adequate operating and administrative procedures, reporting systems, and elements of management control
■ provided financial and other reports that disclose fairly, consistently, fully, and promptly all information necessary to demonstrate program performance
■ collected, deposited, and properly accounted for all revenues and receipts arising from activities
■ conducted programs and expended funds in an efficient and economical manner as well as in compliance with applicable laws and regulations
■ determined that programs effectively served the legislative intent.
OSA is also statutorily mandated to conduct certain audits, including the largest audit, the State’s Comprehensive Annual Financial Report ( CAFR). These audits are required to be conducted in accordance with appropriate professional standards.
The Investigative staff is statutorily mandated to investigate allegations of improper activities, which may occur as a result of misfeasance, malfeasance or nonfeasance by governmental employees or those receiving state money. Investigators are required to protect complainants who provide information to OSA related to these charges. This section operates under the supervision of the Chief Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed in the North Carolina Constitution under Article III, § 7. The State Auditor is elected statewide every four years and is a member of the Council of State which also includes the Governor, Lieutenant Governor, Secretary of State, State Treasurer, Superintendent of Public Instruction, Attorney General, Commissioner of Agriculture, Commissioner of Labor, and Commissioner of Insurance.
Appendix B
Statutorytatutorytatutorytatutory and Constitutional Authority
Annual Report 2006 | Appendix B
Decreasing risk through proactive measures North Carolina Office of the State Auditor
35
Decreasing risk through proactive measures
SENIOR MANAGEMENT TEAM
Leslie W. Merritt, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Lorrie L. Dollar, J. D.
Chief Deputy
Lorriel_ Dollar@ ncauditor. net
( 919) 807- 7517
Jeff Henderson, CPA, CISA
Director of Field Audits
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
James L. Forte, Director of
Internal Operations and
Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Lenny Superville, Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
Cindy Gilliam, Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Kris Bailey, J. D.
General Counsel
Kris_ Bailey@ ncauditor. net
( 919) 807- 7564
Charles K. Duckett
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
Christopher F. Mears, J. D.
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
AUDIT MANAGEMENT TEAM
Joyce Flowers, CPA
Specialty: Single Audit
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayes, CPM
Specialty: Services to
nongovernmental groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Jeff Henderson, CPA, CISA
Specialty: Field Audits,
Wilmington Branch
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Linda Hollar, CPA
Specialty: UNC, UNC Hospitals,
Asheville Branch
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
David King, CPA, CFE
Specialty: Investigations
David_ King@ ncauditor. net
( 919) 807- 7604
Lee Linker, CPA
Specialty: CAFR
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
David Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Carol Smith, CPA
Specialty: Community Colleges
Charlotte Branch
Greensboro Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Faye Steele, CPA
Specialty: Clerks of Court
North Carolina State University
Fayetteville Branch
Greenville Branch
Elizabeth City Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Stan Wesner, CPA
Specialty: Performance Audits
Stan_ Wesner@ ncauditor. net
( 919) 807- 7630
Charles Williford, CPA. CITP, CISA, CFE, CPM
Specialty: Information
Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State Auditor may be requested through the email link on the web site at www. ncauditor. net or by calling the main phone number. Other inquiries, comments, and suggestions may be made by contacting the main office or one of the staff members listed below.
N. C. Office of the Statetatetate Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
Contact Information North Carolina Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
R
aleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
H
otline Number: ( 800) 730- 8477
F
ax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.

2006 Annual Report & 2007 Strategic Plan
North Carolina Office of
the State Auditor
Lesl ie W. Merritt, Jr., CPA, cfp
Decreasing risk through
proactive measures
Honesty • Integrity • Professionalism
North Carolina Office of the State Auditor
3 Message from the Auditor
4 Strategic Plan
8 Information Systems Division
10 Performance Audit Division
13 Financial Audit Division
15 Management Services &
Nongovernmental Compliance Division
18 Investigative Division
24 General Administration
27 Appendix A
34 Appendix B
Contents If a single word could sum- up my vision for how the Office of the State Auditor ( OSA) will play its role in State government, that word would be “ proactive.” Being proactive in a fight against wasteful spending is more than plain rhetoric or a campaign slogan. It means helping achieve effectiveness and efficiency in State government which is a principled bipartisan goal.
The underlying philosophy of being proactive is embracing the idea that the State is not a proprietor of resources, but a trustee of taxpayer money. When put to use for the public good, this money can grow communities and foster a safer, more stable society. However, waste, fraud and abuse of State resources are unconscionable acts and a severe violation of the public trust by those in authority. The State’s resources are the sum of all taxpayers’ earnings which could have been put to good use by the individual earner for the betterment of his or her family. Respect for the taxpayer is the core of this philosophy.
Financial auditors have been through extensive training to improve audit productivity by shifting focus to risk- based auditing. Adopting these principles is a natural extension of a proactive philosophy. Part of what we accomplished in 2006, and my vision for 2007, is to decrease the occurrence of wasteful State spending through a risk- based realignment of OSA’s structure. Through increased training, the use of modern technology and a dedicated yet flexible staff, resources and personnel have become untethered from retroactive auditing techniques as we move toward the use of many risk- based tools.
One such tool is the Strategic Audit Review which will build a bridge from an abstract proactive policy to the actual practice of being proactive. Reams of data flow through State government every day and Strategic Audit Reviews will eventually cover areas that have either escaped OSA scrutiny or show suspicious data trends. While strategic auditing is a standard bearer for our proactive practices, our focus has been to build a team- centered approach. An increase in nonprofit training and compliance, marketing the State Auditor Hotline and financial auditors who think outside of the box are all proactive tools that contribute to stamping- out inefficiencies, waste and abuse before they become problems.
In 2006, the low hanging fruit is already being gathered. As we move into 2007, the success built on the framework of a proactive philosophy, policy and practice will create the momentum to reach higher and tap further into areas of fraud, waste and abuse in State government. As a result State money, the taxpayer’s money, will be able to lift people higher, meet more of our neighbor’s needs and go further in building stronger communities across North Carolina.
Annual Report 2006 | Message from the Auditor
3
Decreasing risk through proactive measures
Message from the Auditor 4
The goals expressed in this strategic plan are intended to be implemented throughout 2007 based on the proactive philosophy articulated in the State Auditor’s message. The strides made in 2006 serve as the launching pad for OSA’s work in 2007 and beyond. Nothing embodies this rebuilding better than 2006’ s AuditWatch training.
AuditWatch
Efficiency Gains
AuditWatch productivity program is considered the premier training program in the audit profession. In today’s environment, as legislators and taxpayers scrutinize expenditures and search for increased value for hard- earned tax dollars, technical excellence and timely reports are not enough. OSA must provide audits in the most efficient manner, and must dramatically change the way audits are conducted. The AuditWatch program met these goals by teaching best practices and innovative techniques from private audit firms, keeping the OSA current on rapidly changing technology to improve productivity, and applying critical thinking analysis and unbiased feedback on current OSA auditing techniques and practices.
Using principles learned through AuditWatch training, OSA has found the necessary tools to whittle away inefficiencies and streamline work product to free- up resources to focus more on fraud, waste and abuse in State government. The bottom line efficiency goal is to reduce audit hours by 25% in the first year. Once achieved, this reduction will be equivalent to a remarkable 35,000 work hours, or adding 22 fulltime auditor positions, which will fuel proactive techniques and team- centered strategies in all of OSA’s divisions.
But the AuditWatch efficiency gains will not stop in 2006. OSA’s strategy in 2007 is to educate State agencies to prepare the more time consuming supporting worksheets in anticipation of the audit, and to train OSA auditors to determine which tasks to undertake and which to leave for the agencies. By engaging the agency in this type of auditing jujitsu, OSA will produce greater efficiency gains and reduce the agency’s audit anxiety by moving auditors in and out of the agency as quickly as possible.
Building on these efficiency gains, the following lays out OSA’s strategic plan to raise accountability in State government.
Information Systems Division
Team- Centered Approach
Information Systems Division ( IS) auditors occupy a unique position to be able to think proactively about discovering suspicious data trends flowing from an agency’s information technology systems. OSA’s goal for 2006 was to integrate IS auditors into financial audit teams with the specific purpose of accumulating and analyzing financial data looking for unusual trends. In 2007, IS auditors will now analyze the numbers to objectively confirm whether fraud, waste or abuse is occurring in any given audit throughout State government. To take full advantage of their
Strategic Plan
Annual Report 2006 | Strategic Plan
Decreasing risk through proactive measures North Carolina Office of the State Auditor
position on the auditing team, IS auditors will rely
upon the innovative techniques of data mining.
Data Mining
OSA has become a leader of state audit shops in
proactive thinking. By consulting with a national
data mining expert from Brigham Young University,
OSA is developing formulas
to find trends in State
government data that lead
to exposing fraud, waste
and abuse. In 2006, the OSA
employed these techniques
to uncover Social Security
Number fraud in the State’s
government. In 2007, the
OSA will expand data
mining’s use to till the
ground in more areas of
State government.
Strategic Audit Reviews
OSA believes Strategic
Audit Reviews build a
bridge from abstract proactive techniques to the
actual practice of being proactive. The Strategic
Audit Review is the vehicle used to combine team-centered
integration, data mining techniques and
their subsequent findings into a single public
document. In 2007, OSA plans to invest a portion
of the AuditWatch efficiency gains in IS to conduct
more Strategic Audit Reviews.
Investigative Division
Team- Centered Approach
The Investigative Division is a key component
of OSA’s strategy to raise accountability in State
government in 2007. To proactively reduce waste
in State government, audit teams must possess
an investigative eye. This has proven to be true in
routine audits in 2006, where suspicious facts may
have been dismissed because financial- oriented
audit programs did not encourage out- of- the- box
thinking and creative procedures. In 2007, OSA
will be working to build
a team- centered auditing
approach where all auditors
are given the analytical tools
and training to proactively
look for fraud, waste and
abuse of taxpayers’ money.
State Auditor’s Hotline
The promotion of the State
Auditor’s Hotline has proven
to be the tip source for the
majority of investigations
leading to direct savings for
taxpayers. This one area is
unique in that money spent
to promote the Hotline
will likely reap a far greater amount in savings
when fraud, waste and abuse of taxpayer money is
uncovered. In early 2007, the OSA plans to unveil a
major plan to promote the State Auditor’s Hotline
using all available tools and resources.
Increase Resources
A portion of the AuditWatch efficiency gains will
be put to good use in the Investigative Division.
Promotion of the Hotline will likely result in
more tips and more investigators will be needed.
As a result, OSA plans to add more supervisor
positions to the Investigative Division to bring
Decreasing risk through proactive measures 5
Once achieved, this
reduction will be
equivalent to a remarkable
35,000 work hours, or
adding 22 fulltime
auditor positions...
greater flexibility to investigations and allow the
Division to simultaneously handle multiple major
investigations in 2007.
Performance Audit Division
Greater Flexibility
Performance audits are usually large in scope,
extremely detailed and
require a significant amount
of OSA resources. As a result,
OSA issues a limited number
of performance audits each
year. In 2006, OSA retooled
the Performance Audit
Division with an eye toward
producing reports that
are narrower in scope and
target specific programs or
areas where the state is at
the greatest risk for fraud,
waste or abuse. In 2007,
OSA’s plan is to apply that
narrow focus to areas of
risk with greater flexibility
as problems emerge. One example of increased
flexibility would be for OSA to provide a timely
response to a legislator’s or taxpayer’s specific
request for a review in their district or area.
Increase Resources
Building on the influx of auditing experience
into the Performance Audit Division in 2006, OSA
plans to conduct more performance audits in 2007.
OSA will meet this goal by reinvesting a portion of
AuditWatch efficiency gains into the Performance
Audit Division and training Performance auditors
to work with greater efficiency. In fact, this training
will conclude by the end of 2006 and Performance
auditors will already be working to meet the
heightened goals in early 2007.
Agency Cooperation
In 2007, OSA is prepared to work along side
other State agencies to set a bench mark by which
State government performance can be measured.
By supporting the new
Government Performance
Audit Committee ( GPAC)
initiative and the Office
of the State Controller’s
initiative to monitor
internal controls as an
extension of management,
OSA’s Performance Audit
Division is prepared to
help steer the focus and
raise accountability in State
government.
OSA takes seriously
the goal of seeing the
internal audit function
strengthened throughout
State government. By working with State agencies,
universities and community colleges, and the
legislative Fiscal Research Division, the OSA plans
to extend its proactive philosophy to the fullest
extent allowed.
Management Services and
Nongovernmental Compliance Division
( MS& NGCD)
Compliance
OSA has oversight responsibility over $ 650-
$ 750 million a year in State and federal grants
to thousands of nonprofits, not- for- profits and
other entities that receive State funds. Therefore,
6 Decreasing risk through proactive measures
Annual Report 2006 | Strategic Plan
In 2007, OSA will be
working to build a
team- centered auditing
approach where all auditors
are given the analytical tools
and training to proactively
look for fraud, waste
and abuse of
taxpayers’ money.
North Carolina Office of the State Auditor
7
Decreasing risk through proactive measures
nonprofit reporting compliance is essential to raise accountability in State government. OSA’s long term goal for MS& NGCD is 100% reporting compliance for all nonprofit organizations. At fiscal year end ( FYE) 2006, the Division identified 437 nonprofit organizations in noncompliance. By FYE 2007, OSA’s strategy is to make steady progress through increased accessibility, training, and accountability to cut noncompliance by 30% or 137 noncompliant grantees.
Increasing accessibility to nonprofit grantees is an important goal for 2007. OSA is developing a reporting function that gives grantees the ability to file their annual reports online. This step will reduce paperwork by promoting electronic filing, eliminate redundancy by simultaneously filing with the grantor agency and OSA, and allow for real- time public access of online annual reports and reviews.
Grantor and grantee reviews are a new tool that OSA plans to use more in 2007. By October 2006, the Division posted 8 grantee reviews. OSA’s goal is to release 24 grantee reviews in 2007, however, that number could be significantly increased by the end of this fiscal year. In addition, OSA plans to complete monitoring reviews of grantor agencies. OSA’s goal is to complete 12 agency monitoring reviews by the end of next fiscal year.
Training & Best Practices
Training is a proactive tool to keep nonprofits in compliance and bring truant organizations back into good standing. OSA’s strategy to boost compliance in 2007 is to maintain the high paced training schedule from 2006, plus increase efficiency and raise effectiveness. An important part of the training’s effectiveness is providing accurate information on evolving issues to local grantees and State grantor agencies. To accomplish this effort, MS& NGCD will continue to issue its Best Practices newsletters that will target issues and information applicable to individual grantees and grantor agencies.
Increase Resources
In 2007, OSA’s plan is to increase training, compliance and accountability with nonprofit organizations that receive state and federal grants. OSA already has the infrastructure in place to invest AuditWatch efficiency gains in MS& NGC. Through training existing branch office staff to work with nonprofits, OSA can meet its training, compliance and accountability goals and review nonprofits while working within their surrounding
geographic areas.
Financial Audit Division
Efficiency Gains
The Financial Audit Division is OSA’s largest division and biggest user of available resources. Because of these facts, the AuditWatch curriculum’s focus on improving efficiency presented a major opportunity to Financial Division auditors and staff. By committing to AuditWatch’s efficiency principles, Financial’s auditors and staff have cut inefficiencies and have the goal of expanding productivity by 25%. That means that up to 35,000 work hours can extend the reach of Financial, Information Systems, Investigations, Performance, and MS& NGC divisions. Without the steadfast commitment to efficiency by the Financial Audit Division, the OSA would be unable to meet the goals outlined in this Plan and the State would be unable to reap the benefits. 8
Decreasing risk through proactive measures
The Information Systems Audit Division’s ( IS Division) responsibilities include analyzing State agency computer systems to ensure that they are properly secured, produce accurate financial reports and comply with State regulations. Staff in this division conduct their own audits of computer systems across the State. In addition, they provide IS audit assistance to financial audit teams to ensure that agency computerized accounting systems can be relied upon to produce accurate financial reports. Without those assurances, financial audit teams would be unable to issue unqualified opinions on the accuracy of agency financial statements.
IS Division auditors are in a unique position to think proactively about discovering suspicious data trends flowing from an agency’s information systems. OSA’s goal for 2006 was to integrate IS auditors into Financial and Investigative audit teams and to increase proactive auditing by providing computer forensic assistance and data mining analyses of agency financial data.
To accomplish this goal, OSA developed a new tool called Strategic Audit Reviews that are issued separately from IS audits. These reviews are used to uncover fraud, waste or abuse of taxpayer resources by following suspicious State agency data trends. While initiated and coordinated by the IS Division, these reviews involve auditors from all divisions of the OSA.
Strategic Audit Reviews build a bridge from an abstract proactive policy to the actual practice of being proactive. By conducting Strategic Audit Reviews through the use of data mining analysis, OSA is in the forefront of auditing trends. To improve innovation and effectiveness, OSA hosted an on site visit of a leading expert in data mining from Brigham Young University. Fueled by resources from AuditWatch efficiency gains, OSA plans to increase the number of Strategic Audit Reviews to bring more accountability to State government.
The OSA’s emphasis for the future is to weave more IS Division auditors into other auditing processes to instill a team- centered approach. Together, the team can more readily identify security risks or suspicious data trends. The General Assembly has approved OSA’s request to hire 6 additional auditors over two years to facilitate the team- centered approach to auditing.
The following is a summary of IS Division’s reports and reviews conducted during 2005- 2006:
IS Audit: North Carolina Central University – General Controls Review
IS conducted an Information System audit of North Carolina Central University. The primary objective of this audit was to evaluate IS general controls at NCCU. The scope included general security, access controls, program maintenance, systems software, systems development, physical security, operations procedures, and disaster recovery. We found weaknesses in systems software and disaster recovery. In systems software, we found that software standards and documentation needed improvement. In disaster recovery, we found that critical general ledger application system
Information Systems Audit
Division
Annual Report 2006 | Information Systems Audit Division North Carolina Office of the State Auditor
Decreasing risk through proactive measures 9
backup tapes were not sufficiently rotated off- site.
The general controls review also revealed several
weaknesses in access controls. Those improvements
were recommended to
management in a private
letter because of the sensitive
nature of the findings.
IS Audit: the University
of North Carolina at
Wilmington – General
Controls Review
IS staff audited the
University of North Carolina
at Wilmington. The primary
objective of this audit was
to evaluate general controls. The scope of our audit
included general security, access controls, program
maintenance, systems software, systems development,
physical security, operations procedures, and disaster
recovery. We found several weaknesses in access
controls.
IS Audit: Elizabeth City State University
– General Controls Review
IS conducted a general controls audit at
Elizabeth City State University. The scope of the
audit included general security, access controls,
program maintenance, systems software, systems
development, physical security, operations
procedures, and disaster recovery. In the
general security area, we found that ECSU
had not performed a risk assessment. We also
found several weaknesses in access controls.
Strategic Audit Review: North Carolina
Central University
The purpose of this Strategic Audit Review was
to identify invalid social security numbers ( SSNs)
in the payroll system at NCCU and to investigate
unusual payments noted on the university payroll.
This review found that
NCCU failed to cross check
employee information
against the State Controller’s
verification report allowing
fraudulent SSNs to be used
as valid identification.
In addition, this review
found an unusually high
number of bookkeeping
errors, incomplete employee
files and one instance of
an employee receiving a
duplicate payment for services.
Information Security Vulnerability
Assessments
Funded by lapsed salaries, OSA contracted with
private firms to conduct a total of 5 vulnerability
assessments. These assessments included the
following entities: the Office of the State Auditor,
General Assembly, Department of Revenue, Office
of the State Controller, and Information Technology
Services. The purpose of these assessments were
to gauge the entities’ security posture at a given
point in time, identify security risks that might
make an entity vulnerable to attack, and determine
appropriate procedures to mitigate the identified
risks. The detailed results of the assessments are kept
confidential as to not announce control weaknesses
to would- be intruders. General results containing
the numbers of high, medium and low weaknesses
are released to the public through OSA’s website
and electronic posting service.
IS Division auditors are
in a unique position to
think proactively about
discovering suspicious
data trends flowing from
an agency’s information
systems.
10
Decreasing risk through proactive measures
OSA’s Performance Audit Division was designed to allow for flexible deployment of resources while upholding strict auditing standards. Unlike prescheduled financial audits, the subjects of performance audits are chosen at the discretion of the State Auditor upon consideration of two factors: greatest risk potential and greatest opportunity for impact. Upon release, performance audits provide the public, agency managers and program managers with an objective analysis of whether State agencies efficiently and effectively manage their programs and activities. Furthermore, these audits are of particular value to legislators who must consider the effectiveness of State programs in funding decisions and to the taxpayers who pay for those programs.
OSA’s efforts in the Performance Audit Division during 2006 revolved around retooling its work to produce reports that are narrower in scope and target specific programs or areas where the state is at greatest risk. We reassigned one of our most experienced financial audit managers to this section and scheduled training for the Division’s auditors and staff. Ten days of intensive training instructed auditors how to develop a comprehensive plan for conducting risk- based audits, how to correctly identify risk and vulnerabilities and how to develop measurement based audit objectives. This reengineering of the Performance Audit Division will result in value- added audits that focus on proactive issues and strengthen the watchdog function in State government.
In 2007, the Performance Audit Division will take on increased activity. Building on the Division’s additional auditing experience and training, OSA will maximize its efforts by directing some of the AuditWatch efficiency gains to do more performance audits. A good example of the type of proactive audits this Division will perform is the audit on the internal audit function in North Carolina agencies and institutions.
The following are summaries of the Performance Audit Division’s audit reports:
Internal Auditing In North Carolina Agencies and Institutions
This performance audit was statewide in scope and had two objectives. First, we sought to determine whether State agencies, universities, and community colleges had sufficient internal audit resources. Second, we assessed the level of compliance that existing internal audit functions achieved with generally recognized internal audit principles and best practices.
The audit found that the State’s internal audit function is inadequately staffed and is in need of more direct guidance from the General Assembly. For example, many state entities had no internal audit function, others were inadequately staffed and others lacked the expertise needed to meet the challenges presented by their organizations. Furthermore, no universal State criteria or minimum standards exist regarding the establishment of activity, authority or responsibilities of an internal audit function.
Performance Audit Division
Annual Report 2006 | Performance Audit Division North Carolina Office of the State Auditor
11
Decreasing risk through proactive measures
Medicaid Prescription Drug Costs
The purpose of this performance audit was to determine why Medicaid prescription drug costs are increasing and whether the cost containment measures initiated by the Division of Medical Assistance were effective.
The audit revealed a number of factors that affected the increased total gross costs of Medicaid prescription drugs. One factor was the increased price for drugs, accounting for approximately 5% of the total annual increase. Other factors were: increasing number of recipients, increasing number of prescriptions per recipient, and increasing the use of managing care methods designed to keep recipients out of institutional settings.
The Division of Medical Assistance had been proactive in identifying and implementing various cost containment measures for the prescription drug program, avoiding an estimated $ 250 million in costs for the State since fiscal year 2002. Specific measures included expanding certain cost containment measures, changing the criteria used in other cost containment programs, and closer examination of cost containment measures utilized by other states.
Driver’s Licensing Process
The purpose of this audit was to determine whether the Division of Motor Vehicles had sufficient procedures in place to ensure that only qualified applicants received a driver’s license, and to determine whether regulations were consistently enforced in driver license offices throughout the State.
This audit found that the State’s procedures were neither sufficient nor as restrictive as those of surrounding states. For example, DMV allowed unregulated interpreters to be used for non- English speaking applicants, inherent security risks existed in one- person offices, mobile licensing units lacked the ability to handle current technology, and communication to the public needed to be improved. Specific findings also included the following: information provided to examiners by management was not timely, weak controls over information input into the Division’s computer system, and inconsistent treatment of field office customers.
Child Caring Institutions
The objectives of this audit were to examine the cost allocation processes of child caring institutions, evaluate administration rates, review the institutions’ utilization rates, examine the rate- setting methodology, and make recommendations on ways to improve the rate- setting process.
We found that the rate- setting methodology did not provide child caring institutions with any incentives to contain costs. Most of the institutions participating in the Title IV- E program were provided rates that enabled them to have most of their allowable costs reimbursed. This methodology rewarded institutions for spending additional dollars and produced a wide range of reimbursement rates among institutions providing similar program services. DHHS’ rate- setting methodology also resulted in an over allocation of $ 400,000 in indirect administration costs to the foster care program. Also, we found that the per diem reimbursement rate for the foster care program could decrease significantly if more of the bed- day capacity of the institutions were utilized.
Oversight of the rate- setting process was lacking and hampered by program complexity, inadequately written procedures and processing delays. There was very little evidence that analytical reviews, cost analysis and comparisons, inquires or any other form of rate management was employed by the Department of Health and Human Services.
Northeastern North Carolina Regional Economic Development Commission
The counties of North Carolina are organized into seven regional partnerships the purpose of which is to promote economic development in their respective regions. Northeastern North Carolina Regional Economic Development Commission/ Partnership is the regional entity designated to market the northeastern area of the State.
The objective of this audit was to determine whether resources provided by the State were used in a prudent business manner for their intended purpose of furthering economic development in the region.
The audit found that the organization’s president created a conflict of interest when he expended resources for the benefit of his future employer. The organization made significant unjustified bonus payments to its employees, employees of the North Carolina Department of Commerce, and to several of the organization’s independent contractors. The organization’s process of selecting contractors did not provide assurance that the organization contracted with the most qualified and at the best possible price. Many of the organization’s employment and consulting contracts contained terms that could adversely affect the organization’s operations and finances and they lacked adequate protection of the organization’s interests. The Board of Directors did not sufficiently exercise its fiduciary responsibilities to monitor operations and ensure funds were used prudently.
Annual Report 2006 | Performance Audit Division
12
Decreasing risk through proactive measures
Originally printed in News and Observer on 4/ 14/ 06 and reprinted with permission North Carolina Office of the State Auditor
13
Decreasing risk through proactive measures
Staff in the Financial Audit Section audit state agencies, universities, community colleges, clerks of superior court, and Smart Start nonprofit organizations. The State Auditor is required to perform these audits as part of the statutory responsibilities or to comply with federal requirements. Some audits are performed at the State Auditor’s discretion to ensure that all agencies are properly reporting their financial conditions.
The Office of the State Auditor spent the greatest percentage of hours ( 38%) to perform annual financial statement audits/ reviews of the State’s sixteen universities and fifty- eight community colleges. One of its largest financial audits is the state’s Comprehensive Annual Financial Report ( CAFR), which accounted for 14% of staff hours. The CAFR contains the annual financial statements for the state of North Carolina as a whole.
Another major financial audit project, accounting for 20% of staff time, is the state’s Single Audit Report. The Single Audit Report contains the results of the audit of the state’s financial statements and the audit of the state’s compliance with laws and regulations pertaining to federal grant programs. The office also periodically audits selected fiscal controls of clerks of superior court and general government agencies.
The audit staff also conducts financial and compliance audits of the organizations participating in the Smart Start program, including the statewide coordinating agency ( the North Carolina Partnership for Children, Inc.) and the individual local partnerships. Smart Start is an early childhood development program designed to prepare children to begin school healthy and ready to succeed. Currently, 80 Smart Start partnerships operate throughout the state.
Financial Audit Results Summary 2005- 2006
For the twelfth consecutive year, the state auditor issued an unqualified opinion on the state’s financial statements. This opinion, for the fiscal year ended June 30, 2005, was contained in the CAFR prepared by the Office of the State Controller.
The State of North Carolina also received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association for the twelfth consecutive year. This award is given to government units whose CAFR achieves the highest standards in government accounting and financial reporting.
In conjunction with the audit of the state’s financial statements, the state auditor issues a report on internal control over financial reporting and on compliance and other matters based on an audit of financial statements in the Single Audit Report. Eleven findings of non- compliance and weaknesses in internal control related to the financial statement audit were reported. These findings disclosed internal control deficiencies related to investments, cash disbursements and year- end financial reporting.
With regard to compliance with federal program requirements, the state auditor issued a qualified opinion on certain federal programs due to material noncompliance with certain requirements. In total, auditors identified $ 919,500 in questioned
Financial Audit Division 14
Annual Report 2006 | Financial Audit Division
costs resulting from 75 identified audit findings.
In addition to reporting on the CAFR and Single
Audit at the statewide level, the office publishes in
separately issued reports the audit findings and
recommendations from
CAFR and Single Audit
work for each individual
government agency.
Reported findings from
university and community
college audits for fiscal
year 2005 primarily related
to four areas: access
rights, financial statement
preparation, management
oversight and internal
control weaknesses. These
internal control weaknesses
were in areas such as financial aid awards, cash
receipts and deposits, cash disbursements and
separation of duties.
In the fiscal 2005 Clerk of Superior Court audits,
OSA noted internal control weaknesses. These
internal control weaknesses were in areas such
as cash receipts and disbursements, segregation
of duties and timely deposits. To better direct
our limited staff resources, we have set a target of
auditing each Clerk of Superior Court every three
years, with cash counts at some offices every year
since clerks handle large amounts of cash.
In the 2005 fiscal control audits of general
government agencies, internal control weaknesses
were reported in such areas as cash receipts, cash
disbursements, payroll, personnel management,
inventory and grants to not- for- profit
organizations. We intend to redirect some of our
resources to agencies which have not received a
full audit in some years to increase accountability.
Smart Start findings issued during 2005- 2006
focused on internal control weaknesses, contract
management and monitoring, competitive bidding
and financial reporting. Audit reports issued
during the year ended June 30, 2006 are listed in
appendix A. This included a
total of 22 audit reports for
the fiscal year ended June
30, 2004, issued subsequent
to June 30, 2005.
For the fiscal year
ended June 30, 2005, the
Office of the State Auditor
performed 45 audits of
Smart Start partnerships.
CPA firms performed 25 of
these audits, with OSA staff
performing the remaining
20 audits. All reports were
issued by June 30, 2006.
OSA’s goal is to complete and release all 41 Smart
Start audits for the 2005- 06 fiscal year by March
31, 2007. In an effort to achieve that goal, the
audit plan for fiscal year 2006 provides for audits
to be performed by both OSA staff and contracted
Certified Public Accounting firms. CPA firms will
be selected through a bidding process and will
be contracted for a total of 25 audits ( 13 due by
November 30, 2006; 6 due by January 31, 2007; 6
due by March 15, 2007).
OSA staff will perform the remaining balance
of 16 audits, with 3 assigned Raleigh- based teams
and 13 to branch office teams. It is anticipated the
more timely release of the audit reports will allow
the North Carolina Partnership for Children and
the local partnerships to more quickly address
identified deficiencies and to make the necessary
improvements to ensure accountability of state
funds.
Decreasing risk through proactive measures
We intend to redirect
some of our resources
to agencies which
have not received a full
audit in some years
to increase
accountability.
North Carolina Office of the State Auditor
15
Decreasing risk through proactive measures
The Management Services and Nongovernmental Compliance Division ( MS& NGCD), formally known as the Public Audit Interface Division, has the responsibility of increasing oversight and accountability of State and Federal pass- through grants typically given to nonprofit organizations. With the changes to the reporting requirements for grants that took effect July 1, 2005, the Auditor determined the need to have a specific division within the OSA to respond to the growing need for compliance oversight and training to adhere to new reporting requirements.
The mission for the creation of MS& NGCD was twofold. First, OSA needed to refocus its resources to increase training and “ best practices” for nonprofit organizations receiving State grants. Second, OSA needed to increase compliance and accountability of funds on the grantee and funding agency levels. The division has set measurable goals for 2007 based on the accomplishments of 2006.
OSA is proud to report that MS& NGCD has satisfied all areas of its original mission. The following is a summary of 2006 accomplishments, broken down by internal category, which has laid the foundations for our expectations in 2007:
Training
• OSA trained almost 4,000 participants in 71 training sessions between August 2005 and August 2006. This training had an immediate impact by reducing the percentage of noncompliant grantees and increasing the overall compliance percentage.
• Multifaceted training: The types of training included grants administration sessions directed at State agency personnel, grants reporting/ accountability sessions directed at grantees, special sessions conducted at the request of various groups ( e. g., DHHS and local fire departments) and presentations at 15 conferences between August 2005 and 2006.
• Web- based training resources: The Division provided templates, reference materials and training tools to all participants online.
Compliance
• Creation of monthly and annual online noncompliance lists: OSA’s efforts have reduced the number of noncompliant grantees by 29.3% and increased the overall compliance percentage to 92%.
• Timely processing of required grantee reports: The Division has shortened the time it takes to process grantee reports from a 5- month backlog to processing within approximately 3 days of receipt.
• Web- based reporting program: The Division is in the process of streamlining the grant reporting process through a web- based program. When complete, we expect the new process to eliminate redundancy, increase data capture efficiency, and improve reporting timeliness.
Management Services &
Nongovernmental Compliance Division 16
Annual Report 2006 | Management Services & Nongovernmental Compliance Division
Best Practices and Research Assistance
• Quarterly Best Practices newsletter: This
newsletter updates grantees on state grant
requirements, potential financial accountability
problems and developing adequate internal
policies and accounting controls.
• Research and reporting assistance: The Division
provides assistance on unique, confusing and
complicated questions
related to grants reporting
via telephone or email.
• Current documents and
formats: The Division
provided grantees
and funding agencies
information on required
grant reporting documents
and formats through
developing, updating and
maintaining online forms.
Agency and Grantee
Reviews
• Agency and grantee
review function: The
Division created an agency and grantee review
function to promote public confidence in the
expenditure of State grants while examining
potential problems.
• Standards for conducting agency and
grantee reviews: The Division set standards
for identifying factors that trigger a review,
determined what issues to investigate, and
proposed formats for reporting the results.
• Review process as training tool: The Division
used the review process to educate agency
personnel on monitoring techniques and to
suggest improvement to those techniques.
In addition, this review process provides an
excellent opportunity to provide best practice
information on improving accountability to
grantees.
Special Projects
• Legislative/ nonprofit conflict of interest form: The
Division developed and distributed a legislative/
nonprofit conflict of interest
form and is creating a
searchable database for this
information ( 19 legislators
have responded through
August 2006).
• Statewide customer
service function: The
Division is formulating,
coordinating, and overseeing
a process to develop and
implement a statewide
customer service function
that will encompass all State
agencies.
• Audit findings
database: The Division is
updating and maintaining an audit findings
database to identify problem trends at State
agencies. This database will assist in internal
audit planning and the identification of best
practices to share with State agency and grantee
personnel.
Going into 2007, OSA is in a good position to
increase training, compliance and accountability
for nonprofit organizations that receive grants.
Directing some of the AuditWatch efficiency
gains to MS& NGCD makes sense because of the
growing number of nonprofits and the need for
Decreasing risk through proactive measures
OSA trained almost 4,000
participants in 71 training
sessions between August
2005 and August 2006.
OSA’s efforts have reduced
the number of noncompliant
grantees by 29.3% and
increased the overall
compliance percentage to
92%.
North Carolina Office of the State Auditor
17
Decreasing risk through proactive measures
oversight. OSA already has the infrastructure in place through existing branch office staff that could be retrained to review nonprofits in their surrounding geographic areas. In addition to reviewing and informing nonprofits of best practices, OSA will focus on the grantor agency, its true “ client” in the transaction.
Compliance reporting and subsequent processing is an important bench mark in how effective MS& NGCD is at compliance and accountability. While OSA cannot control the number of reports it receives, it can control its efficiency in regard to bringing noncompliant grantees into compliance. The number of noncompliant grantees ebbs and flows with reporting deadlines, but the Division’s goal is to reduce the peak number of noncompliant grantees by 30%. That goal represents a reduction of 137 noncompliant grantees by the end of next fiscal year.
Coordinating and cooperating with the grantor agency is of paramount importance to successfully monitor and review nonprofits and their grantor agencies. OSA has already seen a spike in activity evidenced by the Division posting 8 grantee reviews; in October 2006. OSA’s goal is to release 24 grantee reviews, however, that number could be as high as 40 by the end of this fiscal year. In an effort to help train agency monitors to be proactive thinkers, OSA plans to complete monitoring reviews of grantor agencies. OSA’s goal is to complete 12 agency monitoring reviews by the end of next fiscal year.
Training is an important function of MS& NGCD and OSA plans to continue its record breaking efforts in 2007. We plan to maintain our high paced training schedule but increase our efficiency and effectiveness. An important part of training is providing information to grantees and grantors that is relevant to their particular circumstances. To aid in this effort, OSA will continue to issue its Best Practices quarterly newsletter and identify other efforts to benefit both grantors and grantees.
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Morganton
AshevilleCharlotteFayettevilleWilmingtonGreenvilleElizabeth CityRaleighGreensboroWinston- Salem 18
Annual Report 2006 | Investigative Division
OSA’s Investigative Division is one of the most effective tools for investigating allegations of fraud, waste and abuse of State resources. Relying on State constitutional and statutory authority, this arm of OSA uncovers government waste and decreases the risk of future waste through proactive measures.
The majority of tips that lead to investigations come from OSA’s 24- hour, toll- free hotline [ 1- 800- 730- TIPS ( 8477)]. This Hotline is designed for state employees and the general public to report activities they believe may be illegal or improper. Allegations of fraud, waste and abuse may also be reported by traditional mail or via email at hotline@ ncauditor. net.
To protect the integrity of tips, allegations of improper governmental activities are strictly confidential. In addition, state law provides protection from retaliation or discrimination for whistleblowers who report improper or illegal activities to the State Auditor.
We have made great strides in detecting and preventing fraud, waste and abuse of State resources in 2006. We built on our 2005 accomplishments by reducing the number of open cases, completing cases with greater efficiency which reduced the average age of cases, while simultaneously investigating newly reported allegations.
Comparing fiscal 2006 with fiscal 2005, we reduced the number of open cases by 42% ( 45 from 78). This is a substantial accomplishment of increased efficiency given the fact that we received 137 new cases during this fiscal year ( 5% increase over 2005). Consistent with these numbers is the decrease in the average case age. In 2005, the average case age was almost a whole year. By 2006 FYE, we reduced the average case age to 226 days, a reduction of over 26%.
The goals for 2007 are to effectively promote the State Auditor’s Hotline, integrate investigators into a team- centered approach with other divisions, and instill more flexibility to enable the handling of multiple investigations simultaneously.
The promotion of the State Auditor’s Hotline is mandated by statute and has proven to be the tip source for the majority of investigations leading to direct savings for the taxpayers. This one area is unique in that money spent to promote the Hotline will likely reap a far greater amount in savings to the taxpayers when fraud, waste and abuse of their money is uncovered. In 2007, OSA plans to unveil a plan promoting the State Auditor’s Hotline using all available tools and resources.
Now that the Investigative Division is mostly caught- up on the inherited backlog of cases, focus can now be directed toward integrating Investigators into audit teams staffed by Performance and Financial Divisions. To proactively reduce waste in State government, audit teams must possess an investigative eye. In 2007, OSA will be working to build a team- centered auditing approach where the Investigative Division plays an important role in proactively looking for fraud, waste and abuse of taxpayers’ money.
A portion of the AuditWatch efficiency gains will be put to good use in the Investigative Division. Because promotion of the Hotline will result in more tips, more investigators will be needed as part
Investigative Division
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures
19
of other auditing teams. OSA plans to add more supervisor positions to the Investigative Division in 2007. OSA believes this will bring greater flexibility to investigations and allow the Division to handle multiple investigations simultaneously.
The following are summaries of the more notable cases in fiscal year 2005 – 2006. A complete list of reports is detailed in Appendix A.
NORTH CAROLINA DEPARTMENT OF
INSURANCE— RAD TRUST
The Office of the State Auditor received allegations that Department of Insurance personnel and Regulatory Actions Division ( RAD) Trust management mismanaged the assets of London Pacific Life & Annuity Company, an insurance company in receivership due to financial problems. Allegations included the improper disposal of assets, unnecessary purchases, wasteful expenditures, and lack of required reporting to the Wake County Superior Court.
Auditors substantiated many of the allegations and investigated other issues that arose during the course of the audit. The investigation resulted in 15 findings involving failure to follow state rules and regulations, failure to file required quarterly reports to the courts, inadequate supporting documentation, co- mingling of agency and estate assets, failure to obtain bids or quotes, excessive purchases, inadequate policies and procedures, and lack of accounting controls.
NORTH CAROLINA COMMUNITY
COLLEGE SYSTEM
As a result of the following reports, OSA met with the Community College Task Force to highlight the various oversight issues. The Task Force established a proactive, system- wide response to train college staff to avoid repeating these mistakes.
Blue Ridge Community College
During our annual financial audit of Blue Ridge Community College, auditors uncovered several problem areas and referred these issues to the Investigative Audit Division. These problem areas included: internal control weaknesses; potential misuse of work- study payments; and the issuance of a check to a private business lacking adequate supporting documentation.
The special review resulted in eight findings that detailed the lack of internal controls, conflicts of interest, apparent falsification of documents, diversion of student loan funds to a private business, and inadequate oversight.
Halifax Community College
The North Carolina Community College System referred a number of allegations of misconduct concerning the President of Halifax Community College to the OSA. The allegations included falsification of travel records, creation of a hostile work environment, and using College resources for personal and political gain.
Upon investigation, auditors reported the following findings: the President’s contract was approved without advance notice of significant contract amendments, the President received questionable payments for insurance- related fringe benefits and travel expense reimbursements, the President’s executive secretary deleted files from her computer despite Halifax Community College receiving a cease and desist letter from the State Auditor, the automotive tech instructor performed automotive services for the President’s personal vehicle outside of 20
Annual Report 2006 | Investigative Division
classroom instruction, and the President authorized the lease of Halifax Community College property without obtaining approval from the State Board of Community Colleges.
Wake Technical Community College ( WTCC) Board of Trustees
Investigators received tips from the State Auditor’s Hotline about conflicts of interest in the lease of a building owned by a Trustee’s family member to WTCC. In addition, investigators discovered that in a separate transaction, a different WTCC trustee personally benefited from the sale of land to the College.
Auditors confirmed the conflict of interest with evidence that WTCC entered into a three- year lease agreement with a WTCC Trustee’s family member and the Board of Trustees approved the lease agreement with no indication that the Trustee abstained from voting.
Auditors confirmed an additional conflict of interest with evidence that the former Chairman of the Board of Trustees was a principal owner of a company hired to purchase land and construct a training center for the College. The former Chairman acknowledged receiving financial gain from the sale of the property which was in direct violation of State law.
NORTH CAROLINA MUSEUM OF ART
The Office of the State Auditor received allegations through the State Auditor’s Hotline that North Carolina Museum of Art employees received bonuses in the form of salary supplements from the North Carolina Museum of Art Foundation, Inc.
Auditors discovered that at least 58 Museum and foundation employees received salary supplements dating as far back as 1998. The total compensation paid to the Director of the Museum of Art exceeded the amount set forth in legislation and the Director entered into a consulting agreement with the Museum of Art Foundation without obtaining written approval from the Secretary of the Department of Cultural Resources.
Other findings included: the Department of Cultural Resources allowed unauthorized Museum of Art Foundation compensation supplements for the Director and Assistant Director of Marketing to be processed through the State Retirement System, the Museum of Art Foundation may have violated federal tax regulations by executing employment contracts with State employees and reporting their earnings as non- employee compensation, the North Carolina Museum of Art and the Museum of Art Foundation were integrated into a hybrid organization
STONE COLD CHEMICALS, INC.
The Office of the State Auditor received information concerning an out- of- state business named Stone Cold Chemicals, Inc., that was under investigation in a number of states. Stone Cold Chemicals was shut down in Florida and Georgia after investigators in those states determined the company sold products at inflated prices and provided gifts to state purchasing agents in return for placing orders. Records seized from Stone Cold Chemicals indicated that employees of North Carolina government agencies may have also received gifts for purchases from the company.
Our investigation revealed seven Department of Transportation employees and an Appalachian State University employee authorized purchases from Stone Cold Chemicals at up to six times the market
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures 21
price and received gifts in return. During the course
of these investigations, we discovered that Stone
Cold Chemicals also solicited a significant volume of
business from local governments in North Carolina.
Auditors concluded that the
acceptance of gifts in return
for placing orders was a
violation of State law and
referred these issues to local
and state law enforcement
authorities. Our investigators
also identified a number of
local law enforcement, other
agencies and organizations
who had made questionable
purchases from Stone Cold
Chemicals. We forwarded
information to the appropriate
agencies.
NORTH CAROLINA
EASTERN REGION
DEVELOPMENT COMMISSION
The Office of the State Auditor received a number
of allegations concerning the financial management
and oversight of North Carolina’s Eastern Region,
an economic development partnership. Auditors
substantiated allegations regarding lack of
oversight, inadequate documentation, duplicate
payments, under- reporting of interest income,
and the misclassification of an employee for tax
purposes.
Auditors determined the Eastern Region
Development Commission did not exercise
adequate oversight and monitoring of the Eastern
Region’s Marketing and Client Development
activities. The special review revealed the
Executive Director was reimbursed for expenses
that were inconsistent with locations of travel and
were without adequate supporting documentation.
Moreover, auditors discovered the Eastern Region
under reported interest earned on its initial state
appropriation and the
Business Development
Consultant was paid twice
for the same expenses.
NORTH CAROLINA
DEPARTMENT OF
PUBLIC INSTRUCTION
Investigators received
allegations that the
Department of Public
Instruction’s Reading First
Section Chief maintained
a special fund outside of
the Department of Public
Instruction with a vendor for
the Reading First program
and used this special fund to make unnecessary
disbursements including payments to the Section
Chief ’ s children. The special review resulted in
seven findings regarding operation of the special
fund, noncompliance with procurement and travel
policies, and unnecessary expenditures.
Auditors recommended the transfer of funds
to the Department of Public Instruction general
fund bank account and management comply with
departmental policy and state law. Additionally,
auditors recommended the Section Chief
reimburse the Department of Public Instruction
for inappropriate travel reimbursements and
submit documentation to properly establish staff
duty stations.
The promotion of the
State Auditor’s Hotline is
mandated by statute and has
proven to be the tip source for
the majority of investigations
leading to direct savings for
the taxpayers
22
Annual Report 2006 | Investigative Division
EMPLOYMENT SECURITY COMMISSION
Auditors received allegations through the State Auditor’s Hotline that an employee with a criminal record for false pretenses and cheats was granted access to confidential employee information at the Employment Security Commission. The Office of State Personnel confirmed the employee had access to the Personnel Management Information System which contains social security numbers, dates of birth, and compensation data for every current and former employee of the Employment Security Commission. The employee was serving an active prison sentence and participating in the Department of Correction’s work- release program through his position with the Employment Security Commission’s personnel section.
Auditors concluded his access to this information, based on his criminal background and work- release status, created an unnecessary risk for the Employment Security Commission and its employees. Additionally, the employee used his state- issued computer to excessively visit internet dating sites. Auditors recommended the Employment Security Commission take disciplinary action against the employee and review the process for granting access to confidential personnel information.
NORTH CAROLINA DEPARTMENT OF STATE TREASURER
Auditors received allegations through the State Auditor’s Hotline that the former Chief Deputy of the Department of State Treasurer used state resources for political purposes. Auditors discovered the former Chief Deputy used the agency’s computer resources to maintain and process documents related to political activities. Analysis of the Department of State Treasurer computer network revealed more than 450 files related to campaign activities including mailings for fundraisers, contribution mailing lists, campaign event invitations, thank you letters for contributions, contribution spreadsheets, operations outlines, voting precinct data, campaign event schedules, and letters to the media. Auditors recommended the Department of State Treasurer create and implement an internal policy prohibiting the use of state resources for political activities.
NORTH CAROLINA AGRICULTURAL AND TECHNICAL STATE UNIVERSITY
Auditors received a complaint through the State Auditor’s Hotline that the former Physical Plant Manager at North Carolina Agricultural and Technical State University violated procurement policies and accepted meals from vendors. Auditors concluded the acceptance of lunches was in violation of General Statute § 133- 32 regarding gifts and favors. Auditors also discovered that the University’s policy on conflicts of interest did not adequately specify that employees involved in preparing, awarding, and supervising public contracts cannot accept gratuities. Auditors recommended management train all employees involved in contract administration about the laws involving gifts and the University revise its policy on gratuities to comply with statutes.
NORTH CAROLINA DEPARTMENT OF TRANSPORTATION
Investigators received allegations through the State Auditor’s Hotline that employees of the Department of Transportation’s Materials and Test Unit violated a variety of state policies. The investigation substantiated a Soil Engineer
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Decreasing risk through proactive measures
in the Materials and Test Unit used his state- issued wireless telephone for personal calls and the Materials and Test Unit did not have proper documentation for the use of wireless phones.
The Soil Engineer admitted he used his wireless phone to talk to his wife and individuals constructing his personal residence. Policies of the Department of Transportation, the Office of State Budget and Management, and the Office of State Personnel prohibit making personal calls on state- issued wireless phones. In addition, use of the wireless phone for personal calls contributed to the Soil Engineer exceeding the monthly plan for allowable minutes.
Auditors recommended management take appropriate action with employees who exceed the allowable minutes for wireless phones including modifying or terminating wireless contracts. Further, auditors recommended management reiterate its policies prohibiting personal use of wireless phones and seek reimbursement from the Soil Engineer for the incurred overage charges. Additionally, auditors recommended management review assignment of all wireless telephones for compliance with departmental policies and clarify types of communications devices subject to the policies.
NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES
An allegation was received through the State Auditor’s Hotline that employees of the
Department of Health and Human Services accepted gifts of material value from a computer services vendor in violation of state and departmental policies. Auditors confirmed this allegation in regards to the Deputy Secretary, the Director of the Division of Information Resource Management, and the Computer/ Telecom Services Manager.
Auditors recommended the Department of Health and Human Services ensure its employees understand and follow applicable State laws, the North Carolina Board of Ethics’ Executive Orders, and departmental policies regarding appearances of conflicts of interest and ethical conduct.
ADMINISTRATIVE OFFICE OF THE COURTS
Auditors received an allegation through the State Auditor’s Hotline concerning foreign language ( Spanish) interpreters allegedly receiving payment from non- English speaking defendants while also being paid by the State. Although auditors did not substantiate the specific allegation, we confirmed clerks of court and chief district court judges received the same concerns on a regular basis.
As a result, auditors recommended the Administrative Office of the Courts revise the form for appointing interpreters to include a certification that the interpreter has not nor will accept any other payment for the same services. In addition, auditors recommended the Administrative Office of the Courts consider requesting presiding judges to inform non- English speaking defendants and participants not to make any payment to the court- appointed interpreter and develop internal processes to monitor, audit, and investigate various interpreter concerns. 24
General Administrative Division is the nerve center for the OSA, performing three core functions. First, it coordinates OSA personnel administration from initial hiring to training and placement. Second, it manages the processing of all audits, reports and reviews. This processing entails reviewing and editing of draft copies, electronic and print shop formatting, and responding to media questions and public concerns. Third, General Administrative staff is responsible for the coordination of all OSA payroll, budget and purchasing.
Personnel
To be a proactive State agency, OSA must be a responsible manager of its personnel. After selecting the best qualified applicants, OSA must then provide quality training to employees and a quality control review of employees work product.
Recruiting
OSA developed an active program to recruit on university and college campuses around the state this year. Making informal presentations to Beta Alpha Psi meetings, accounting classes and other events blends well with our established presence at formal “ meet the firms” nights and career fairs. In addition, building relationships with campus faculty and staff helps OSA better identify applicants based on their career goals. By not positioning itself as a direct competitor with public firms or private industry, OSA has found immediate success with applicants who are interested in pursuing a career that provides a balance between their personal and professional lives.
OSA’s goal is to build relationships to target the right applicant, thus reducing turnover and eliminating the waste of resources that frequent turnover creates. OSA had a number of interns this year because of the positive relationships.
Training
To better direct resources to areas with the greatest risk, our auditors must be exceptionally well trained and cross- trained in as many areas as practical. This is challenging for our auditors but at the same time a great and exciting career opportunity. Our training department is tasked to help recruit, train and retain the best professionals possible.
In May 2006, OSA kicked- off a series of training sessions for audit productivity improvement and reengineering. OSA partnered with AuditWatch to present in- depth training for all financial audit staff with the goal of improving efficiency, improving audit quality and increasing staff morale. AuditWatch was not about implementing new standards but was about looking at our audits differently, increasing upfront planning and shortening the time from field work to final audit report. AuditWatch showed OSA more efficient methods of auditing.
In the past, OSA’s ability to follow- up on hotline tips and scrutinizing areas of State government has been limited by the number of available work hours. However, the AuditWatch program is expected to help address this problem. The efficiency rewards of implementing the AuditWatch approach are
General Administration
Annual Report 2006 | General Administration
Decreasing risk through proactive measures North Carolina Office of the State Auditor
Decreasing risk through proactive measures 25
expected to be an approximate 25% increase in
newly available time resources. Approximately
35,000 work hours can now be redirected to
deserving projects OSA has been unable to address
in the past. In terms of human capital, these
productivity principles
could increase OSA by the
equivalent of 22 fulltime
auditor positions. These
work hours from OSA’s
Financial Division will be
reinvested in expanding
OSA’s financial auditing
reach in the Performance,
Information Systems,
Financial, Investigative,
and Management Services
and Nongovernmental
Compliance Divisions.
The improvements
gained through this audit
productivity initiative
are not just temporary ideas, but will become
permanent practices. The State Auditor appointed a
Productivity Task Force to meet regularly to ensure
OSA realizes this productivity potential on an on-going
basis. The Task Force includes personnel
throughout the Agency on active subcommittees
over specific subject areas. The subcommittee
design is to find a cross section of employees to
make recommendations to, and coordinate with,
the Task Force as we move forward into the next
fiscal year.
Quality Controls
OSA’s work product is governed by strict
adherence to professional standards promulgated
by government agencies and professional
organizations including the Government Auditing
Standards Board, the Financial Accounting
Standards Board, the Federal Office of Management
and Budget, the American Institute of Certified
Public Accountants, and various state and federal
laws and regulations. These
standards require auditors
remain independent,
receive continuing
professional education,
and address the role of
the auditee in resolving
and tracking findings and
recommendations.
OSA has a control system
to ensure the quality of
audit work. The system
includes supervisory
review of all work product
and management review
of audit reports and
critical supporting work
papers. Staff who did not participate in an audit
periodically review the work. To uphold the
standards of the supervisory review, OSA’s goal
is that all newly hired Supervisor level employees
and above have a valid CPA license, or the merit-based
equivalent in work experience.
Another layer of OSA review exists. The Agency
receives a peer review every three years under
the direction of the National State Auditors
Association. During the peer review, members
of audit staffs from other states review the office’s
quality assurance system and work papers for
compliance with auditing standards. The most
recent peer review was performed during the 2005-
2006 fiscal year and resulted in a clean opinion.
A report exposing an
instance of fraud, waste
or abuse of taxpayers’
resources, if publicized by
the statewide news media,
becomes an effective tool
for the deterrence of future
fraud, waste or abuse of
taxpayers’ resources.
26
Processing & Publicationublication
With approximately 192 OSA employees, the publishing of audits, reports and reviews is a complicated and time consuming process. Magnified by the sensitive nature of the audit subject matter, OSA’s administrative staff must be detail minded and highly organized. The goals of accuracy and timeliness are the staff’s top priorities. However without effective publication, the audit, report or review would go unnoticed.
Publication of the audits, reports and reviews is an essential part of OSA’s proactive posture. A report exposing an instance of fraud, waste or abuse of taxpayers’ resources, if publicized by the statewide news media, becomes an effective tool for the deterrence of future fraud, waste or abuse of taxpayers’ resources. OSA, through a positive relationship with the news media, can proactively deter others from committing similar acts of fraud, waste and abuse of taxpayer money.
Budgeting & Purchasing
OSA is the taxpayer’s watchdog against wasteful spending of State resources. To be an effective messenger, OSA must ensure that its resources are spent as wisely as possible.
OSA’s appropriated budget is approximately $ 16 million and the agency bills approximately $ 3 million for federal audit work. In addition to the central office in Raleigh, OSA has 9 branch offices throughout the State which our budget office is responsible for managing financially.
Budgeting and purchasing are governed by strict rules and regulations. An independent CPA firm annually conducts a financial audit of the office and routinely issues a clean opinion of its financial statements.
Management Informationnformation Systems
The MIS Division of the Office of the State Auditor is charged with four primary objectives:
• Provide technology support for OSA auditors
• Oversight of Senate Bill 991 compliance
• Enterprise Technology planning and
implementation
• Automating OSA’s critical business function
to increase productivity
In addition to providing for the daily computing needs of OSA, the MIS Division completed several projects to enhance the efficiency and quality of the Agency. MIS participated in the ePartners program at NC State University by working with a senior design team to provide upgrades and updates of computers and field systems to save valuable travel time and expense. MIS enhanced the publishing of online audits and reports on the OSA website and worked closely with the Office of the State Controller to ensure the success of the Beacon Project ( statewide payroll application slated for implementation in 2008).
OSA’s 2007 goals for MIS are to improve the security of the Agency and prepare for future efficiency improvements. Specifically, MIS will streamline the Management Services and Nongovernmental Compliance Division’s procedures to provide timelier grant and grantee information to the public. MIS will also implement a portal- based OSA Intranet that will improve communications and collaboration within the Agency. Finally, MIS will update the computing infrastructure, replace older networking switches, increase the bandwidth to the main office, and install a comprehensive wireless networking security system.
Annual Report 2006 | Investigative Division
Decreasing risk through proactive measures North Carolina Office of the State Auditor
27
Decreasing risk through proactive measures
Report Number Title Release Date
ISA- 2007- 4160 North Carolina Office of the State Controller - Vulnerability Assessment 11/ 13/ 06
GRA- 2006- 0007 Review of Sit In Movement, Inc. - State Grant 11/ 8/ 06
GRA- 2006- 0008 Review of Bertie- Martin- Washington Community Development Corporation
State Grant 11/ 8/ 06
GRA- 2006- 0009 Review of Sandhills Mediation Center State Grant 11/ 8/ 06
ISA- 2007- 4660 North Carolina Office of Information Technology Services -
Vulnerability Assessment 11/ 7/ 06
ISA- 2007- 1000 North Carolina General Assembly - Vulnerability Assessment 11/ 2/ 06
FIN- 2006- 3000 Office of the Governor - Statewide Financial Audit Procedures 11/ 1/ 06
ISA- 2007- 3300 North Carolina Office of the State Auditor - Vulnerability Assessment 11/ 1/ 06
FIN- 2006- 8303 USS North Carolina Battleship Commission - Financial Statement Audit 10/ 31/ 06
PER- 2006- 0215 North Carolina Highway Program Located Within the Department of
Transportation 10/ 31/ 06
GRA- 2006- 0005 Review of Hope Pregnancy Care Center- State Grant 10/ 26/ 06
GRA- 2006- 0006 Review of Western Youth Network- State Grant 10/ 26/ 06
FIN- 2006- 2139 Greene County Clerk of Superior Court - Fiscal Control Audit 10/ 24/ 06
GRA- 2006- 0001 Review of Wilson County Residential Services, Inc.- State Grant 10/ 23/ 06
GRA- 2006- 0002 Review of Marine Corp Museum of the Carolinas- State 10/ 23/ 06
GRA- 2006- 0003 Review of Club Fifteen- State Grant 10/ 23/ 06
GRA- 2006- 0004 Review of Caswell County Parish, Inc.- State Grant 10/ 23/ 06
FIN- 2006- 2188 Tyrrell County Clerk of Superior Court - Fiscal Control Audit 10/ 16/ 06
FIN- 2007- 2115 Carteret County Clerk of Superior Court - Fiscal Control Audit 10/ 16/ 06
FIN- 2006- 2133 Columbus County Clerk of Superior Court - Fiscal Control Audit 10/ 11/ 06
PER- 2006- 7216 Internal Auditing In North Carolina Agencies And Institutions 10/ 11/ 06
FIN- 2006- 2150 Johnston County Clerk of Superior Court - Fiscal Control Audit 10/ 3/ 06
FIN- 2006- 2185 Surry County Clerk of Superior Court - Fiscal Control Audit 10/ 3/ 06
SAR- 2006- 0001 North Carolina Central University - Strategic Audit Review 10/ 2/ 06
FIN- 2006- 2166 Onslow County Clerk of Superior Court - Fiscal Control Audit 9/ 28/ 06
FIN- 2005- 6850 Martin Community College - Financial Statement Audit 9/ 27/ 06
INV- 2006- 0309 North Carolina State University 9/ 20/ 06
FIN- 2006- 2108 Bladen County Clerk of Superior Court - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 2173 Pitt County Clerk of Superior Court - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 4160 Office of the State Controller - Fiscal Control Audit 9/ 14/ 06
FIN- 2006- 2112 Cabarrus County Clerk of Superior Court - Fiscal Control Audit 9/ 13/ 06
Appendix A
The following reports are listed in reverse chronological order and were issued from the begining of fiscal year 2005- 2006 through the date of this annual report: 28
INV- 2006- 0308 North Carolina Department of Transportation 9/ 13/ 06
FIN- 2006- 1000 North Carolina General Assembly - Fiscal Control Audit 9/ 12/ 06
INV- 2006- 0307 North Carolina Department of Administration - Division of Purchase
and Contract 9/ 5/ 06
FIN- 2006- 2184 Stokes County Clerk of Superior Court - Fiscal Control Audit 8/ 30/ 06
FIN- 2006- 2107 Bertie County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
FIN- 2006- 2113 Caldwell County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
FIN- 2006- 2177 Robeson County Clerk of Superior Court - Fiscal Control Audit 8/ 29/ 06
INV- 2006- 0306 North Carolina State University 8/ 28/ 06
FIN- 2006- 2152 Lee County Clerk of Superior Court - Fiscal Control Audit 8/ 7/ 06
NGV- 2005- 9157 Chowan- Gates- Perquimans Partnership for Children -
Financial Statement Audit 7/ 26/ 06
FIN- 2006- 2102 Alleghany County Clerk of Superior Court - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 2128 Davidson County Clerk of Superior Court - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 3510 Department of Public Instruction - Fiscal Control Audit 7/ 25/ 06
FIN- 2006- 2194 Watauga County Clerk of Superior Court - Fiscal Control Audit 7/ 24/ 06
FIN- 2006- 4500 Department of Correction - Fiscal Control Audit 7/ 24/ 06
FIN- 2006- 2105 Avery County Clerk of Superior Court - Fiscal Control Audit 7/ 21/ 06
FIN- 2006- 2180 Rutherford County Clerk of Superior Court - Fiscal Control Audit 7/ 21/ 06
ISA- 2006- 6086 Elizabeth City State University 7/ 21/ 06
NGV- 2005- 9167 Partnership for Children of Lincoln & Gaston Counties Inc -
Financial Statement Audit 7/ 21/ 06
NGV- 2005- 9185 Yadkin County Partnership for Children - Financial Statement Audit 7/ 21/ 06
INV- 2006- 0305 North Carolina Public Staff 7/ 19/ 06
FIN- 2006- 2168 Pamlico County Clerk of Superior Court - Fiscal Control Audit 7/ 17/ 06
NGV- 2005- 9155 Carteret County Partnership for Children - Financial Statement Audit 7/ 17/ 06
NGV- 2005- 9104 Cleveland County Partnership for Children Inc - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9130 Randolph County Partnership for Children - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9138 Anson County Partnership for Children - Financial Statement Audit 7/ 12/ 06
NGV- 2005- 9150 Alamance County Partnership for Children - Financial Statement Audit 7/ 12/ 06
INV- 2006- 0303 North Carolina Agricultural & Technical State University 7/ 6/ 06
INV- 2006- 0304 North Carolina Department of Health and Human Services 7/ 6/ 06
FIN- 2005- 6802 Asheville- Buncombe Technical Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6807 Brunswick Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6816 Central Carolina Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6861 Piedmont Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 6864 Randolph Community College - Financial Statement Audit 6/ 30/ 06
FIN- 2005- 2130 Duplin County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 06
FIN- 2005- 6830 Edgecombe Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2005- 6851 Mayland Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2005- 6883 Stanly Community College - Financial Statement Audit 6/ 29/ 06
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
29
Decreasing risk through proactive measures
FIN- 2005- 6898 Wilson Technical Community College - Financial Statement Audit 6/ 29/ 06
FIN- 2006- 2198 Yadkin County Clerk of Superior Court - Fiscal Control Audit 6/ 29/ 06
INV- 2006- 0302 Employment Security Commission 6/ 29/ 06
NGV- 2005- 9137 Wilson County Partnership for Children - Financial Statement audit 6/ 29/ 06
NGV- 2005- 9143 Guilford County Partnership for Children, Inc. - Financial Statement Audit 6/ 29/ 06
NGV- 2005- 9163 Harnett County Partnership for Children - Financial Statement Audit 6/ 29/ 06
NGV- 2005- 9102 Burke County Partnership for Children Inc - Financial Statement Audit 6/ 28/ 06
FIN- 2005- 6086 Elizabeth City State University - Financial Statement Audit 6/ 27/ 06
FIN- 2006- 2159 Mecklenburg County Clerk of Superior Court - Fiscal Control Audit 6/ 27/ 06
FIN- 2006- 2165 Northampton County Clerk of Superior Court - Fiscal Control Audit 6/ 27/ 06
NGV- 2005- 9101 North Carolina Partnership for Children Inc - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9111 Orange County Partnership for Young Children - Financial Stement Audit 6/ 27/ 06
NGV- 2005- 9139 Brunswick County Partnership for Children Inc - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9144 Hoke County Partnership for Children and Families - Financial Statement Audit 6/ 27/ 06
NGV- 2005- 9161 Franklin- Granville- Vance Partnership for Children Inc -
Financial Statement Audit 6/ 27/ 06
FIN- 2005- 6082 The University of North Carolina at Pembroke - Financial Statement Audit 6/ 26/ 06
FIN- 2005- 6843 Blue Ridge Community College - Financial Statement Audit 6/ 26/ 06
FIN- 2005- 4205 North Carolina Turnpike Authority - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6820 Cleveland Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6832 Fayetteville Technical Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6840 Halifax Community College - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6847 Johnston Community College - Financial Statement 6/ 22/ 06
FIN- 2006- 2147 Hyde County Clerk of Superior Court - Fiscal Control Audit 6/ 22/ 06
FIN- 2006- 2195 Wayne County Clerk of Superior Court - Fiscal Control Audit 6/ 22/ 06
NGV- 2005- 9140 Bertie County Partnership for Children Inc - Financial Statement Audit 6/ 22/ 06
NGV- 2005- 9168 Madison County Partnership for Children and Families Inc 6/ 22/ 06
NGV- 2005- 9170 Mitchell- Yancey County Partnership for Children Inc - Financial Statement Audit 6/ 22/ 06
FIN- 2005- 6842 Haywood Community College - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9109 Jones County Partnership for Children - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9160 Davie County Partnership for Children Inc - Financial Statement Audit 6/ 21/ 06
NGV- 2005- 9166 Partnership for Children of Johnston County Inc - Financial Statement Audit 6/ 19/ 06
FIN- 2005- 6075 Western Carolina University - Financial Statement Audit 6/ 16/ 06
FIN- 2005- 6860 Pamlico Community College - Financial Statement Audit 6/ 15/ 06
FIN- 2005- 6868 Roanoke- Chowan Community College - Financial Statement Audit 6/ 15/ 06
FIN- 2005- 6838A GHG Construction Corporation - Financial Statement Audit 6/ 14/ 06
FIN- 2006- 2170 Pender County Clerk of Superior Court - Financial Statement Audit 6/ 14/ 06
NGV- 2005- 9122 Lenoir/ Greene Partnership for Children Inc - Financial Statement Audit 6/ 14/ 06
FIN- 2005- 6838 Guilford Technical Community College - Financial Statement Audit 6/ 13/ 06
NGV- 2005- 9124 Person County Partnership for Children - Financial Statement Audit 6/ 13/ 06
PER- 2006- 7218 Performance Audit - Child Caring Institutions 6/ 12/ 06 30
NGV- 2005- 9182 Union County Partnership for Children - Financial Statement Audit 6/ 8/ 06
NGV- 2005- 9186 Richmond County Partnership for Children - Financial Statement Audit 6/ 7/ 06
FIN- 2005- 6836 Gaston College - Financial Statement Audit 6/ 6/ 06
FIN- 2005- 6852 McDowell Technical Community College - Financial Statement Audit 6/ 6/ 06
FIN- 2005- 6896 Wilkes Community College - Financial Statement Audit 6/ 6/ 06
ISA- 2006- 6060 The University of North Carolina at Wilmington 6/ 6/ 06
INV- 2006- 0301 North Carolina’s Eastern Region 6/ 5/ 06
NGV- 2005- 9153 Bladen County Partnership for Children Inc - Financial Statement Audit 6/ 5/ 06
NGV- 2005- 9176 Montgomery County Partnership for Children - Financial Statement Audit 6/ 5/ 06
FIN- 2006- 2120 Chowan County Clerk of Superior Court - Fiscal Control Audit 6/ 1/ 06
FIN- 2006- 2169 Pasquotank County Clerk of Superior Court - Fiscal Control Audit 6/ 1/ 06
NGV- 2005- 9119 Durham Partnership for Children - Financial Statement Audit 5/ 31/ 06
NGV- 2005- 9115 Avery County Partnership for Children 5/ 30/ 06
NGV- 2005- 9175 Polk County Partnership for Children Inc. - Financial Statement Audit 5/ 30/ 06
NGV- 2005- 9180 Smart Start of Transylvania County - Financial Statement Audit 5/ 30/ 06
FIN- 2005- 6812 Carteret Community College - Financial Statement Audit 5/ 24/ 06
FIN- 2005- 6055 The University of North Carolina at Asheville - Financial Statement Audit 5/ 23/ 06
FIN- 2005- 6890 Wake Technical Community College - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9136 Washington County Child Advocacy Council Inc. - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9146 Lee County Partnership for Children - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9152 Beaufort/ Hyde Partnership for Children - Financial Statement Audit 5/ 23/ 06
NGV- 2005- 9171 Northampton Partnership for Children Inc. - Financial Stament Audit 5/ 23/ 06
FIN- 2006- 2114 Camden County Clerk of Superior Court - Fiscal Control Audit 5/ 18/ 06
FIN- 2005- 6846 James Sprunt Community College - Financial Statement Audit 5/ 16/ 06
FIN- 2005- 6870 Robeson Community College - Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9103 Caldwell County Smart Start A Partnership for Young Children -
Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9108 Hertford County Partnership for Children Inc. - Financial Statement Audit 5/ 16/ 06
NGV- 2005- 9132 Rutherford County Partnership for Children Inc. - Financial Statement Audit 5/ 16/ 06
FIN- 2005- 6866 Richmond Community College - Financial Statement Audit 5/ 9/ 06
NGV- 2005- 9151 Alexander County Partnership for Children - Financial Statement Audit 5/ 9/ 06
NGV- 2005- 9164 Henderson County Partnership for Children - Financial Statement Audit 5/ 9/ 06
FIN- 2005- 6884 Surry Community College - Financial Statement Audit 5/ 8/ 06
NGV- 2005- 9184 The Partnership for Children of Wayne County, Inc - Financial Statement Audit 5/ 8/ 06
FIN- 2005- 6814 Catawba Valley Community College - Financial Statement Audit 5/ 4/ 06
FIN- 2005- 6874 Rowan- Cabarrus Community College - Financial Statement Audit 5/ 4/ 06
FIN- 2006- 2138 Granville County Clerk of Superior Court 5/ 4/ 06
ISA- 2006- 6090 North Carolina Central University 5/ 3/ 06
INV- 2006- 0300 North Carolina Department of Public Instruction 5/ 2/ 06
NGV- 2005- 9129 Pamlico Partnership for Children, Inc. - Financial Statement Audit 4/ 27/ 06
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
31
Decreasing risk through proactive measures
INV- 2006- 0299 North Carolina Department of State Treasurer 4/ 26/ 06
FIN- 2005- 6088 Fayetteville State University - Financial Statement Audit 4/ 20/ 06
FIN- 2005- 6070 North Carolina Agricultural & Technical State University 4/ 12/ 06
FIN- 2005- 8730 Single Audit Report for Year Ended June 30 2005 4/ 12/ 06
PER- 2006- 7217 Northeastern North Carolina Regional Economic Development Commission 4/ 12/ 06
FIN- 2005- 4900 Crime Control and Public Safety Department of 4/ 10/ 06
FIN- 2005- 6810 Cape Fear Community College 4/ 7/ 06
FIN- 2005- 3510 Public Instruction Department of 4/ 6/ 06
FIN- 2005- 4410 Health and Human Services Department of 4/ 6/ 06
FIN- 2005- 4650 Employment Security Commission 4/ 6/ 06
FIN- 2005- 3800 Labor Department of 4/ 5/ 06
FIN- 2005- 4200 Transportation Department of 4/ 5/ 06
FIN- 2005- 4300 Department of Environment and Natural Resources Statewide Financial
Audit Procedures 4/ 5/ 06
FIN- 2005- 4600 Commerce Department of 4/ 5/ 06
FIN- 2005- 6800 Community College Department of 4/ 5/ 06
FIN- 2005- 6828 Durham Technical Community College 4/ 5/ 06
NGV- 2005- 9114 Ashe County Partnership for Children 4/ 5/ 06
NGV- 2005- 9117 Chatham County Partnership for Children 4/ 5/ 06
FIN- 2005- 8410 NC Teacher and State Employees Comprehensive Major Medical Plan 3/ 29/ 06
FIN- 2005- 6804 Beaufort County Community College 3/ 20/ 06
FIN- 2005- 6060 UNC - Wilmington 3/ 13/ 06
FIN- 2005- 4160 Controller Office of the State 3/ 9/ 06
FIN- 2005- 6808 Caldwell Community College and Technical Institute 3/ 8/ 06
FIN- 2005- 8025 Boards and Commissions 3/ 8/ 06
INV- 2006- 0298 Stone Cold Chemicals, Inc. 3/ 2/ 06
INV- 2006- 0297 Duplin County Board of Education 3/ 1/ 06
FIN- 2005- 6050 UNC- Charlotte 2/ 28/ 06
FIN- 2005- 6084 Winston Salem State University 2/ 28/ 06
FIN- 2005- 6020 UNC- Chapel Hill 2/ 23/ 06
FIN- 2005- 6824 Craven Community College 2/ 22/ 06
INV- 2006- 0296 Appalachian State University 2/ 22/ 06
FIN- 2005- 8560 Wireless Emergency Telephone System Fund 2/ 21/ 06
INV- 2006- 0295 North Carolina Department of Transportation 2/ 20/ 06
PER- 2006- 7901 Follow- up Report on Findings From 2005 Audit Reports and Reviews 2/ 17/ 06
FIN- 2005- 3400 Treasurer Department of the State CAFR/ Single Audit 2/ 13/ 06
FIN- 2005- 6882 Southwestern Community College 2/ 13/ 06
FIN- 2005- 8530 North Carolina Global Transpark Authority 2/ 6/ 06
INV- 2006- 0294 Onslow County Schools 2/ 3/ 06
FIN- 2005- 4660 Information Technology Services 1/ 27/ 06 32
FIN- 2005- 6095 UNC Hospitals NC Memorial Hospital 1/ 27/ 06
FIN- 2005- 4407 Butner Town of 1/ 25/ 06
FIN- 2006- 2153 Lenior County Clerk of Superior Court 1/ 24/ 06
INV- 2006- 0293 North Carolina Museum of Art 1/ 24/ 06
INV- 2006- 0292 Wake Technical Community College Board of Trustees 1/ 23/ 06
INV- 2006- 0291 North Carolina State Education Assistance Authority 1/ 19/ 06
FIN- 2005- 6030 North Carolina State University 1/ 18/ 06
FIN- 2005- 6040 UNC- Greensboro 1/ 18/ 06
FIN- 2005- 6065 East Carolina University 1/ 18/ 06
FIN- 2005- 6080 Appalachian State University 1/ 18/ 06
INV- 2006- 0290 Blue Ridge Community College 1/ 18/ 06
INV- 2006- 0289 UNC Math and Science Education Network 1/ 12/ 06
INV- 2006- 0288 UNC- Chapel Hill School of Education Foundation 1/ 10/ 06
INV- 2005- 0287 North Carolina Agricultural & Technical State University 1/ 4/ 06
FIN- 2005- 4620 NC Ports Authority 12/ 29/ 05
INV- 2005- 0286 North Carolina Board of Electrolysis Examiners 12/ 16/ 05
FIN- 2005- 6092 NC School of the Arts 11/ 29/ 05
FIN- 2005- 4464 Health and Human Service Department of 11/ 18/ 05
FIN- 2005- 4700 Revenue Department of 11/ 16/ 05
FIN- 2005- 8303 Battleship Commission 11/ 1/ 05
FIN- 2006- 2146 Hoke County Clerk of Superior Court 11/ 1/ 05
INV- 2005- 0284 North Carolina Community Colleges 10/ 25/ 05
INV- 2005- 0285 Halifax Community College 10/ 25/ 05
FIN- 2005- 4500 Correction Department of 10/ 19/ 05
FIN- 2006- 2162 Moore County Clerk of Superior Court 10/ 19/ 05
FIN- 2006- 2142 Harnett County Clerk of Superior Court 10/ 3/ 05
FIN- 2005- 2144 Henderson County Clerk of Superior Court 9/ 27/ 05
ISA- 2005- 4660 The Office of the Governor 9/ 21/ 05
INV- 2005- 0283 North Carolina Department of Insurance - RAD Trust 9/ 19/ 05
NGV- 2004- 9120 Down East Partnership for Children 9/ 16/ 05
INV- 2005- 0279 North Carolina General Assembly, with Attorney General Opinion 9/ 12/ 05
FIN- 2005- 2000 Administrative Office of the Courts 9/ 6/ 05
NGV- 2004- 9145 Iredell County Partnership for Young Children, Inc. 9/ 2/ 05
NGV- 2004- 9149 Rowan County Partnership for Children, Inc. 9/ 2/ 05
NGV- 2004- 9172 Onslow County Partnership for Children, Inc. 9/ 2/ 05
NGV- 2004- 9110 Mecklenburg County Partnership for Children 8/ 31/ 05
NGV- 2004- 9141 Columbus County Partnership for Children, Inc. 8/ 31/ 05
NGV- 2004- 9183 Children’s Council of Watauga County, Inc. 8/ 31/ 05
FIN- 2004- 6854 Montgomery Community College 8/ 30/ 05
FIN- 2005- 4305 Clean Water Management Trust Fund 8/ 30/ 05
Annual Report 2006 | Appendix A
Decreasing risk through proactive measures North Carolina Office of the State Auditor
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Decreasing risk through proactive measures
NGV- 2004- 9107 Halifax- Waren Smart Start Partnership for Children, Inc. 8/ 29/ 05
NGV- 2004- 9142 Dare County, Children and Youth Partnership for 8/ 29/ 05
NGV- 2004- 9128 New Hanover County Partnership 8/ 26/ 05
NGV- 2004- 9127 Buncombe County Partnership 8/ 25/ 05
FIN- 2005- 2154 Lincoln County Clerk of Superior Court 8/ 24/ 05
FIN- 2005- 2155 Macon County Clerk of Superior Court 8/ 24/ 05
FIN- 2005- 2189 Union County Clerk of Superior Court 8/ 24/ 05
NGV- 2004- 9105 Partnership for Children of Cumberland County, Inc. 8/ 24/ 05
NGV- 2004- 9121 Smart Start of Forsyth County 8/ 24/ 05
NGV- 2004- 9154 Cabarrus County Partnership for Children 8/ 24/ 05
FIN- 2004- 6868 Roanoke- Chowan Community College 8/ 23/ 05
FIN- 2005- 2122 Cleveland County Clerk of Superior Court 8/ 23/ 05
NGV- 2004- 9126 Alleghany County Partnership for Children, Inc. 8/ 23/ 05
NGV- 2004- 9178 Sampson County Partnership for Children 8/ 23/ 05
INV- 2005- 0282 Administrative Office of the Courts 8/ 17/ 05
FIN- 2004- 6801 South Piedmont Community College 8/ 15/ 05
FIN- 2004- 8550 NC Agricultural Finance Authority 8/ 15/ 05
NGV- 2004- 9156 Caswell County Partnership for Children 8/ 15/ 05
FIN- 2005- 2100 Alamance County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2116 Caswell County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2118 Chatham County Clerk of Superior Court 8/ 8/ 05
FIN- 2005- 2156 Madison County Clerk of Superior Court 8/ 8/ 05
NGV- 2004- 9135 Wake County SmartStart 8/ 8/ 05
NGV- 2004- 9169 Martin- Pitt County Partnership for Children, Inc. 8/ 8/ 05
FIN- 2005- 2145 Hertford County Clerk of Superior Court 7/ 29/ 05
NGV- 2004- 9131 Robeson County Partnership for Children 7/ 26/ 05
NGV- 2004- 9118 Duplin County Partnership for Children 7/ 21/ 05
NGV- 2004- 9133 Stokes County Partnership for Children 7/ 21/ 05
PER- 2005- 0214 Drivers Licensing Process 7/ 20/ 05
FIN- 2005- 2192 Warren County Clerk of Superior Court 7/ 15/ 05
FIN- 2005- 4463 Health and Human Services, Department of 7/ 15/ 05
FIN- 2005- 2191 Wake County Clerk of Superior Court 7/ 8/ 05
FIN- 2004- 6090 North Carolina Central University 7/ 7/ 05
INV- 2005- 0280 North Carolina Department of Transportation 7/ 1/ 05
INV- 2005- 0281 North Carolina Department of Health and Human Services 7/ 1/ 05
ISA- 2005- 6800 Audit of the Information System General Controls of the North Carolina
Community College System 7/ 1/ 05
PER- 2005- 0213 Performance Review of Medicaid Prescription Drug Costs 7/ 1/ 05 34
The OSA independently evaluates the state’s fiscal accountability and public program performance for North Carolina’s citizens and others. The office strives to assure that state government is executing its management responsibilities in compliance with applicable laws, rules, regulations, and policies. The office also evaluates whether sufficient management controls and policies exist to enable state agencies to most efficiently and effectively use public resources.
STATUTORY AUTHORITY
North Carolina General Statutes § § 147- 64.1- 64.14 set forth the duties and responsibilities of the State Auditor, and requires the State Auditor be independent of the organizations being audited. These statutes mandate that all state agencies and entities partially or entirely supported by public funds be subject to audit by the state auditor. These audits independently evaluate public program performance for the General Assembly, Governor, executive departments and agencies, governing bodies, and the general public. Specifically, the State Auditor independently examines and makes findings of fact on whether State agencies:
■ established adequate operating and administrative procedures, reporting systems, and elements of management control
■ provided financial and other reports that disclose fairly, consistently, fully, and promptly all information necessary to demonstrate program performance
■ collected, deposited, and properly accounted for all revenues and receipts arising from activities
■ conducted programs and expended funds in an efficient and economical manner as well as in compliance with applicable laws and regulations
■ determined that programs effectively served the legislative intent.
OSA is also statutorily mandated to conduct certain audits, including the largest audit, the State’s Comprehensive Annual Financial Report ( CAFR). These audits are required to be conducted in accordance with appropriate professional standards.
The Investigative staff is statutorily mandated to investigate allegations of improper activities, which may occur as a result of misfeasance, malfeasance or nonfeasance by governmental employees or those receiving state money. Investigators are required to protect complainants who provide information to OSA related to these charges. This section operates under the supervision of the Chief Deputy State Auditor.
CONSTITUTIONAL AGENCY
The State Auditor is a constitutional officer listed in the North Carolina Constitution under Article III, § 7. The State Auditor is elected statewide every four years and is a member of the Council of State which also includes the Governor, Lieutenant Governor, Secretary of State, State Treasurer, Superintendent of Public Instruction, Attorney General, Commissioner of Agriculture, Commissioner of Labor, and Commissioner of Insurance.
Appendix B
Statutorytatutorytatutorytatutory and Constitutional Authority
Annual Report 2006 | Appendix B
Decreasing risk through proactive measures North Carolina Office of the State Auditor
35
Decreasing risk through proactive measures
SENIOR MANAGEMENT TEAM
Leslie W. Merritt, Jr., CPA, CFP
State Auditor
Leslie_ Merritt@ ncauditor. net
( 919) 807- 7500
Lorrie L. Dollar, J. D.
Chief Deputy
Lorriel_ Dollar@ ncauditor. net
( 919) 807- 7517
Jeff Henderson, CPA, CISA
Director of Field Audits
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
James L. Forte, Director of
Internal Operations and
Legislative Affairs
James_ Forte@ ncauditor. net
( 919) 807- 7642
Lenny Superville, Ph. D.
Chief Information Officer
Lenny_ Superville@ ncauditor. net
( 919) 807- 7625
Cindy Gilliam, Controller
Cindy_ Gilliam@ ncauditor. net
( 919) 807- 7553
Kris Bailey, J. D.
General Counsel
Kris_ Bailey@ ncauditor. net
( 919) 807- 7564
Charles K. Duckett
Personnel Officer
Charles_ Duckett@ ncauditor. net
( 919) 807- 7617
Christopher F. Mears, J. D.
Director of Public Affairs
Chris_ Mears@ ncauditor. net
( 919) 807- 7566
AUDIT MANAGEMENT TEAM
Joyce Flowers, CPA
Specialty: Single Audit
Joyce_ Flowers@ ncauditor. net
( 919) 807- 7550
Janet Hayes, CPM
Specialty: Services to
nongovernmental groups
Janet_ Hayes@ ncauditor. net
( 919) 807- 7558
Jeff Henderson, CPA, CISA
Specialty: Field Audits,
Wilmington Branch
Jeff_ Henderson@ ncauditor. net
( 919) 807- 7513
Linda Hollar, CPA
Specialty: UNC, UNC Hospitals,
Asheville Branch
Linda_ Hollar@ ncauditor. net
( 919) 807- 7565
David King, CPA, CFE
Specialty: Investigations
David_ King@ ncauditor. net
( 919) 807- 7604
Lee Linker, CPA
Specialty: CAFR
Lee_ Linker@ ncauditor. net
( 919) 807- 7583
David Nance, CPA
Specialty: Health Issues
David_ Nance@ ncauditor. net
( 919) 807- 7660
Carol Smith, CPA
Specialty: Community Colleges
Charlotte Branch
Greensboro Branch
Morganton Branch
Winston- Salem Branch
Carol_ Smith@ ncauditor. net
( 336) 585- 2513
Faye Steele, CPA
Specialty: Clerks of Court
North Carolina State University
Fayetteville Branch
Greenville Branch
Elizabeth City Branch
Faye_ Steele@ ncauditor. net
( 919) 807- 7589
Stan Wesner, CPA
Specialty: Performance Audits
Stan_ Wesner@ ncauditor. net
( 919) 807- 7630
Charles Williford, CPA. CITP, CISA, CFE, CPM
Specialty: Information
Systems Audits
Charles_ Williford@ ncauditor. net
( 919) 807- 7627
Copies of reports issued by the Office of the State Auditor may be requested through the email link on the web site at www. ncauditor. net or by calling the main phone number. Other inquiries, comments, and suggestions may be made by contacting the main office or one of the staff members listed below.
N. C. Office of the Statetatetate Auditor
2 South Salisbury Street
20601 Mail Service Center
Raleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
Hotline Number: ( 800) 730- 8477
Fax Number: ( 919) 807- 7647
Contact Information North Carolina Office of the State Auditor
2 South Salisbury Street
20601 Mail Service Center
R
aleigh, NC 27699- 0601
Main Phone Number: ( 919) 807- 7500
H
otline Number: ( 800) 730- 8477
F
ax Number: ( 919) 807- 7647
OSA printed this report in- house as a cost saving measure for taxpayers.